TCF Financial Corporation 2009 Annual Report
Built on convenience, stability and trust.
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TCFIR9344
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
www.tcfbank.com
TCF was built on a conservative philosophy of banking, which has been the
foundation of our growth and success. We understand what our customers
want and, as a result, we deliver the best products with the most convenient
services in the markets we serve. Our talented team members have been
putting The Customer First for over three generations and now, more than
ever, we are focused on growing our core businesses, providing exceptional
customer service, and staying true to our corporate philosophy (see back
cover). We greatly appreciate the trust our customers put in us, the effort
and innovation of our team members and the exceptional leadership from
our Board of Directors. We are optimistic about the future at TCF.
Table of Contents
1 Letter to Our Stockholders
11 Board of Directors
12 Financial Highlights
Annual Report on Form 10-K
1 Business
16 Selected Financial Data
17 Management’s Discussion and Analysis
46 Consolidated Financial Statements
50 Notes to Consolidated Financial Statements
79 Other Financial Data
92 Corporate Information
95 Stockholder Information
97 Corporate Philosophy
Corporate Philosophy
Profit Centers. TCF’s focused profit center structure creates
superior financial performance. Day-to-day operations are
organized by profit centers within business lines: Wholesale
Banking (commercial banking, leasing and equipment
finance, and inventory finance), Retail Banking (branch
banking and retail lending), Treasury Services and Support
Services, each with profit center goals and objectives. TCF
emphasizes net income, return on average assets and
earnings per share growth at acceptable levels of risk. We
offer products that are profitable and contribute to these
goals. Our profit center structure creates a highly respon-
sive and performance driven culture.
Convenience. TCF emphasizes convenience in banking; we’re
open 12 hours a day, seven days a week, 364 days per year.
TCF banks a large and diverse customer base. We provide
customers innovative products through multiple banking
channels, including traditional, supermarket and campus
branches, TCF Express Teller® and other ATMs, debit cards,
phone banking, and Internet banking.
Checking Accounts. TCF focuses on growing and retaining
its large number of low-interest cost checking accounts
by offering convenient hours and delivery channels, and
products with many free features. TCF uses the checking
account as the anchor account to build additional
customer relationships.
Deposits. TCF earns a significant portion of its profits
from the deposit side of the bank. We accumulate a large
number of low cost accounts through convenient services
and products targeted to a broad range of customers.
As a result of the profits we earn from the deposit business,
we can minimize credit risk on the asset side.
Secured Lender. TCF is primarily a secured lender and
emphasizes credit quality over asset growth. The costs of poor
credit far outweigh the benefits of unwise asset growth.
Conservative Underwriting. TCF’s diversified asset portfolio
and our extensive credit review practices reduce our credit
risks while creating profitability and sustainable growth,
even in the most challenging economic environments.
We lend and lease to high-quality customers and invest
only in programs that add value to the organization and
yield solid returns.
Interest-rate Risk. TCF believes interest-rate risk should
be minimized. Interest-rate speculation does not generate
consistent profits and is high risk.
2009 Annual Report : 97
Capital and Liquidity. TCF focuses on prudent capital and
liquidity management which strengthens our capital
position, increases our borrowing capacity, and reduces our
costs and risks. We are solidly capitalized and have access
to ample liquidity to conduct business. TCF’s financial
strength makes us a safe and sound financial institution.
Expansion. TCF grows both through de novo expansion and
acquisition. We are growing by starting new businesses,
opening new branches and offering new products and services.
The Customer First. TCF strives to place The Customer First.
We believe providing great service helps to retain existing
customers, attract new customers, create value for our
stockholders, and build pride in our employees. We also
respect customers’ concerns about privacy and know they
place their trust in us. TCF is committed to protecting the
private information of our customers and retaining that
trust is our priority.
Stock Ownership. TCF encourages stock ownership by our
officers, directors and employees. We have a mutuality of
interest with our stockholders, and our goal is to earn for
them an above-average return.
Technology. TCF places a high priority on the development of
technology to enhance productivity, customer service and
new products. Properly applied technology increases revenue,
reduces costs and enhances customer service. We centralize
back office activities and decentralize the banking process.
Conservative Accounting. TCF utilizes conservative account-
ing and financial reporting principles that accurately and
honestly report our financial condition and results of
operations. We believe good accounting drives good business
decision-making.
Open Employee Communication. TCF encourages open
employee communication and promotes from within whenever
possible. TCF places the highest priority on honesty, integrity
and ethical behavior.
Equal Treatment. TCF does not discriminate against anyone
in employment or the extension of credit. As a result of
TCF’s community banking philosophy, we market our products
and services to everyone in the communities we serve.
Community Participation. TCF believes in community
participation, both financially and through volunteerism.
We feel a responsibility to help those less fortunate.
2009 Annual Report : 1
William A. Cooper, Chairman of the Board
and Chief Executive Officer
Dear Stockholders:
2009 was another very difficult year for the financial
offering, secured lending, prudent capital and liquidity
services industry, yet TCF continued to be profitable and
management, and well-managed expense control. We
reported its 59th consecutive quarter of profitability at
continue to stand by our conservative philosophy of
year-end — a record level of sustainability not seen by
banking which has proven to be far superior to the failed
many of our peers. In fact, the 2008 and 2009 recession
models of our larger competitors. We have a business
resulted in 140 failed banks, a national unemployment
model that works. With the commitment of our dedicated
rate exceeding 10 percent, and a large decline in housing
employees, I expect to see continued growth and success.
and other asset values which resulted in an unparalleled
expansion of government intervention into the financial
system to ward off a fiscal calamity.
A Look at 2009:
• TCF was the first bank out of the Top 50 Banks in the
TCF has remained profitable during this crisis because
country to repay the TARP preferred stock. In April, TCF
we did not engage in the activities that created the
returned $361.2 million of TARP funds it had received
financial meltdown. TCF has not made subprime, teaser
from the U.S. Treasury Department’s Capital Purchase
rate, Option ARM, out of market, low documentation or
Program (CPP). TCF accepted the TARP funding in
other risky mortgage loans. TCF has not participated in
order to avoid being labeled a weak bank but after the
junk bonds, collateralized debt obligations, asset-backed
government changed the rules of the program and public
commercial paper, structured investment vehicles, or other
perception soured, we felt it was no longer advantageous
off-balance-sheet programs. TCF has no auto or credit
or even necessary for TCF to continue its participation in
card portfolios. TCF has never owned FAnnIe MAe® or
the program. A law change in February allowed for TARP
Freddie Mac® preferred stock, trust preferred securities
participants with strong capital levels to pay back TARP.
or bank-owned life insurance. TCF did not originate, secu-
Unlike so many other TARP-exiting participants, TCF was
ritize and sell assets. We have no derivatives. While we
not required to raise additional capital to repay the TARP
did not participate in these activities, we were not immune
funds. TCF paid a total of $8.9 million to the government
to their effects. TCF’s earnings were down and the stock
in TARP-related dividends and taxpayers benefited by an
price remained pressured throughout 2009, closing the
additional $9.5 million from the auction of TCF warrants
year at $13.62 per share, down 4 cents from 2008.
the government received in connection with the program.
TCF management developed a conservative banking
The result of TCF’s participation was an estimated 11
philosophy in the late 1980’s and we have since strictly
percent after-tax cost to TCF stockholders.
adhered to this business model; as a result, TCF’s
fundamentals have remained strong. We have been
able to produce high performance results for many years
because we consistently value a large and growing
customer base through a convenient product and service
• TCF earned $87.1 million and diluted earnings per
common share was $.54. Although we were disap-
pointed in these results, TCF recently reported its
59th consecutive profitable quarter while many of our
competitors fell short during the economic crisis.
2 : TCF Financial Corporation and Subsidiaries
• TCF’s net interest margin was 3.87 percent for the full
of risk-weighted assets. We continue to exceed
year of 2009 and 4.07 percent in the fourth quarter of
the well-capitalized requirements as defined by the
2009. Our industry leading deposit strategies and the
Federal Reserve Board. At December 31, 2009, TCF
reduction of high interest-rate certificates of deposit
had $152.1 million of excess total risk-based capital over
balances in 2009 contributed significantly to net interest
the stated well-capitalized requirement. TCF’s tangible
margin. In addition, we continued to closely monitor
common equity ratio was 5.86 percent. TCF has access
pricing on both our deposits and loans and leases in order
to the capital markets to raise additional equity or debt
to stay competitive and yield the highest return. TCF’s net
for future expansion.
interest margin continues to be better than the average
of the Top 50 Banks by approximately 66 basis points.
• TCF reorganized its day-to-day operations by business
lines: Retail Banking (branch banking and retail lending),
• To preserve capital in today’s market, TCF lowered
Wholesale Banking (commercial banking, leasing and
its annual dividend rate to $.20 per share in 2009. The
equipment finance, and inventory finance), Treasury
dividend reduction accelerates the accumulation of
Services and Support Services. each business line has
retained earnings. In addition, it adds to our capital base
its own profit center goals and objectives. We believe
for future growth. Prudent capital management allowed
the new organizational structure improves our already
us to take advantage of growth opportunities to expand
highly responsive and performance-driven culture.
our business without diluting our stockholder base. TCF
has paid dividends 87 consecutive quarters and returning
capital to our stockholders is an important part of how we
deliver value.
TCF Retail Banking:
TCF’s average core deposits, which include checking,
savings and money market deposits, totaled a record
• TCF is financially strong and remains a safe and sound
$7.2 billion at December 31, 2009, up 37 percent from
bank. We are solidly capitalized and have ample liquidity
last year. TCF does not have any brokered deposits.
to conduct business. TCF’s Tier 1 risk-based capital was
Savings was our largest deposit growth category in 2009,
$1.2 billion, or 8.52 percent of risk-weighted assets, and
increasing 68 percent as a result of several initiatives on
total risk-based capital was $1.5 billion, or 11.12 percent
product features, pricing, cross-selling and marketing that
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were incorporated into our sales program. In addition, we
continued to aggressively market our checking account
products resulting in an astonishing 24 percent increase
in the number of new checking accounts opened in
2009. Our Free Cash premium and Tell-A-Friend campaign
were highly successful in attracting new customers to
TCF, thus allowing for additional cross-sell opportunities
and future fee income. Another key part of our deposit
strategy in 2009 was the designed runoff of high interest-
rate certificates of deposits, which reduced our cost
of funds and improved our net interest margin. We
will continue to focus our efforts on growing low-cost
deposits in 2010 and looking for new products and
premiums to introduce into the market.
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In 2010, we will once again keep our organic branch
Diluted Earnings
Per Common Share
Dollars
Diluted EPS
Dividends Paid
Risk-Based Capital
Millions of Dollars
TARP
Total Risk-Based Capital
Well Capitalized Requirement
expansion plans to a minimum unless opportunities arise
with our two supermarket partners. We will continue to
evaluate positively accretive acquisition transactions or an
2009 Annual Report : 3
TCF provides a variety of convenient
banking channels to meet the needs of
our diverse customer base including
443 banking offices in eight Midwest
and Mountain West states and 1,639
ATMs free to TCF customers.
convenience
FDIC-assisted transaction if it fits within the scope of our
many years. This also allowed us to further strengthen
business and growth plans. We also intend to continue
our credit underwriting guidelines and improve yields and
our successful branch relocation and remodel programs
terms on all of our commercial lending products. The
during the year.
commercial real estate business in general experienced
Consumer real estate loan growth remained relatively
hardship in 2009 and many banks were left with significant
flat in 2009 and totaled $7.3 billion at year-end. Our asset
losses in this category. TCF’s commercial real estate loans
strategy shifted somewhat in 2009. We reduced the
performed well and grew 10 percent in 2009. I attribute
consumer real estate portfolio and made investments
this success to our conservative underwriting practices
in our other higher-yielding asset categories because
and our commitment to relationship banking with long-
of ongoing deterioration in home values. In addition,
term customers. Commercial business loans decreased
we felt it was not in our best interest to compete with
11 percent for the year as we saw further slowdown in
government-sponsored lending programs providing low
retail, manufacturing and construction concurrent with
rates over long durations. Despite these challenges,
the slowing economy. We believe this situation will turn
TCF provided lending to creditworthy customers and
around in 2010 as the economy begins to recover. In
funded $910.8 million of new consumer real estate loans.
addition, we expect to see very good opportunities from
These new loans have thus far performed well with
the commercial real estate business even though non-
low delinquencies and minimal charge-offs. We are
bank competitors may return to the market.
pleased with these early results and attribute the good
Specialty finance, TCF’s nationally-focused leasing,
performance to our conservative underwriting standards.
equipment and inventory finance businesses increased
$1.1 billion, or 43 percent, during 2009. Our growth
TCF Wholesale Banking:
Commercial loans increased 7 percent in 2009 and totaled
momentum in specialty finance stemmed from portfolio
purchases and acquisitions as well as organic growth.
$3.7 billion at year-end. During the year, ReITs, conduits
TCF’s leasing and equipment finance business grew
and other non-bank competitors were out of the market
24 percent. This $3.1 billion portfolio is well-diversified
which led to substantial declines in prepayments and
provided TCF lending opportunities we had not seen for
by equipment type and geography. Our leasing and
equipment finance operation is now the 32nd largest in
4 : TCF Financial Corporation and Subsidiaries
the United States, and is the 15th largest bank affiliated
industry based in Minneapolis, Minnesota, was a very
leasing company in the United States. In 2009, we saw
good fit. Red Iron Acceptance, LLC, was created as
some large competitors leave the market which offered
a joint venture between TCF Inventory Finance® and
us the opportunity to take advantage of several portfolio
The Toro Company to provide floorplan and open account
purchases. In September, Winthrop Resources
financing to dealers and distributors of the Toro® and
Corporation, our technology-oriented leasing company,
exmark® brands. At year-end, the TCF Inventory Finance
acquired Fidelity national Capital, Inc., from Fidelity
portfolio balance was $469 million, an increase from
national Financial, Inc., that included a portfolio of
virtually nothing at the end of 2008. This team has worked
approximately $250 million in leases funded by $215
hard in 2009 to position the company and we expect to
million of non-recourse discounted lease rentals. The
see a significant return on our investment in 2010.
purchased portfolio is comprised primarily of fair market
value tax leases on technology equipment. As part of
the acquisition, Winthrop Resources hired certain sales
Credit Quality:
Credit losses continued to significantly impact TCF’s
representatives and operational staff to support the
results in 2009. Although we fared better than most of
business on an ongoing basis as Winthrop Resources
our peers, we felt the results were unacceptable based
intends to promote this new business through existing
on our own historical standards. net charge-offs increased
channels. TCF equipment Finance also acquired portfolios
95 percent, or 57 basis points, from last year primarily
during the year adding $340 million, or 11 percent, to its
from increases in consumer real estate and leasing and
total portfolio. We expect these investments to continue
equipment finance which resulted from economic
to yield good returns for us in the future.
conditions. While disappointed, we remained profitable
TCF’s newest business, TCF Inventory Finance, Inc.,
in most of our major business lines.
has been in operation for just over a year now, specializing
In 2009, TCF’s consumer real estate delinquencies
in inventory floorplan financing principally for dealers of
and net charge-offs continued to increase as credit
consumer products in the United States and Canada.
deterioration spread from subprime to prime mortgages.
We started the business by entering the consumer
Lower home values, reduced availability of equity and
electronics and household appliances industries and
increased unemployment led to continued losses for TCF
expanded into the lawn and garden industry in 2009.
in 2009. To help our customers avoid home foreclosure,
Our strategy for this business is to align ourselves with
we developed several loan restructuring programs that
leaders in the industries we serve. Thus our partnership
extend payment dates, reduce interest rates and/or reduce
with The Toro Company, a leader in the lawn and garden
payment amounts. In 2009, TCF restructured loans totaling
stability
TCF is financially strong; we focus on
prudent capital and liquidity management.
Making wise investments, like our newest
business in inventory finance, is a top
priority. We invest only in programs that
add value to the organization and yield
solid returns.
2009 Annual Report : 5
$240.1 million. Reserves for losses on accruing consumer
is still too early to see a recovery. While still challenging,
real estate restructured loans were 11 percent of the
our credit losses remain less than most of TCF’s peers
outstanding balance at December 31, 2009. TCF’s current
and are manageable.
loan modification program that started in August repre-
sented 68 percent of the restructured loan balance at the
end of 2009. The program was designed to assist home-
Legislative/Regulatory Burden:
Another headwind that placed pressure on TCF’s stock in
owners with temporary financial hardships by temporarily
2009 was speculation around how proposed regulations
reducing payments for 12 to 18 months. Although only
and legislation limiting non-sufficient funds fees and
time will tell, we are optimistic about the program
interchange fees could impact TCF’s fee income. There
because it allows qualifying borrowers to stay current on
was plenty of typical political posturing around this
their payments while planning for the future. To date, the
subject. The dust settled in early november after the
program is performing very well with limited re-defaults.
Federal Reserve approved a rule dealing with service
TCF also saw some credit deterioration within its
charges scheduled to go into effect July 1, 2010. The rule
Wholesale Banking business that was attributable to
will require banks to either obtain advance approval from
the recessionary state of the economy. Increases in
customers to charge a fee for covering debit card and
delinquencies and net charge-offs were experienced
ATM transactions that create an overdraft on the account,
in both commercial banking and leasing and equipment
or reject those payments at the point-of-sale. TCF has
finance. While some of our larger losses in 2009 were
taken a proactive stance to collect advance approvals
attributable to limited exposures, such as residential
from our checking account customers before the stated
home building in Michigan, we continued to closely
deadline. We know our customers value the overdraft
monitor our wholesale customers and in particular those
services provided by TCF’s checking account products
customers in distressed industries and geographies.
and we believe many of our checking account customers
Our relationship banking strategy provided us the ability
will opt-in to the program. We have also implemented
to effectively work out some distressed loans and in
a minimum balance maintenance fee on checking
other situations, it allowed us close access to appraise
accounts. The jury is still out and other proposed service
the collateral and diligently write them down accordingly.
Wholesale Banking continues to be very profitable, is
highly diversified and well-managed.
Provision for credit losses of $258.5 million increased
35 percent from last year and was largely impacted by
the increased activity of our loan restructuring program.
At December 31, 2009, TCF’s allowance for loan and
lease losses totaled $244.5 million, or 1.68 percent
of loans and leases, an increase of $72.1 million from
$172.4 million, or 1.29 percent of loans and leases, at
December 31, 2008. We increased reserves by $22.4
million due to increased levels of restructured loans. We
expect, however, that the level of these restructurings
will stabilize in 2010. Our loan modification programs
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have been beneficial in reducing TCF’s credit costs while
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helping to keep our customers in their homes.
Overall, we are starting to see a few positive signs
in our early-stage delinquency rates and home values in
some of our markets appear to be stabilizing, although it
Net Charge-Offs &
Allowance for Loan
& Lease Losses
Percent
Allowance for Loan &
Lease Losses
Net Charge-Offs
6 : TCF Financial Corporation and Subsidiaries
charge legislation is pending that could impact our
We saw some improvement in deposit fee income in
checking account products. We are staying close to
2009; however, volume levels remained low as customers
the topic and will take careful steps to manage our way
continued to be mindful of their spending and saved more.
through any regulatory or legislative changes.
This trend in customer behavior also impacted TCF’s card
Regulatory reform following the financial crisis was the
revenue which totaled $104.8 million in 2009 and was
government’s main focus in 2009 and into 2010. Members
essentially flat from 2008. Our large checking account
of Congress have been busy pursuing several legislative
base contributed to TCF’s ranking as the 10th largest
changes that could significantly impact the banking
Visa® Classic debit card issuer in the United States.
industry. The proposed bill to limit interchange fees could
A strong fee category in 2009 was leasing and
impact the banking industry; however, I do not believe
equipment finance revenues, which totaled $69.1 million,
this bill will pass in the Senate as it is a concern between
up 25 percent, from the prior year. Both operating lease
merchants and banks without a consumer advocate.
revenues and customer-driven sales-type lease revenues
The industry could also be impacted by the creation of
increased in 2009. We also saw an increase in new
a centralized regulatory agency, the Consumer Financial
originations on equipment placed in service.
Protection Agency, by adding undue regulatory burden.
We continue to closely monitor developments on the
regulatory front and are committed to remaining innovative
Expenses:
TCF was very efficient in managing its operating expenses
in both our product and service offerings that fall within the
in 2009. We continued to place emphasis on our core
parameters of Congressional and regulatory requirements.
businesses of deposit gathering and loan and lease
Revenue:
TCF’s total revenue in 2009 was $1.2 billion, up 6 percent,
production. As a result, we streamlined our day-to-day
operations and reorganized the company by profit
centers within business lines. We believe these actions
from last year. net interest income increased 7 percent
reduce redundancies, improve efficiencies and create
as a result of our aggressive deposit pricing strategy and
a highly responsive and performance-driven culture.
the favorable yields we received on our loans and leases,
Unfortunately, these decisions were made at the cost
and non-interest income increased 6 percent from 2008.
of a number of long-term and loyal employees. I applaud
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Total Revenue
Millions of Dollars
Net Interest Income
Millions of Dollars
+6% annual growth rate (’09 vs. ’08)
+7% annual growth rate (’09 vs. ’08)
Fees and Other Revenue
Net Interest Income
those employees that have assumed additional duties as
a result of the restructuring and look to all employees to
continue to find ways to contribute to the bottom line
while carefully monitoring expenses.
The year 2009 also presented some unusual charges
that fell outside of core operating expenses. First, the
Federal Deposit Insurance Corporation required a special
FDIC insurance assessment of $8.2 million in the second
quarter and subsequently increased our insurance
premium rate. Second, foreclosed real estate and
repossessed asset expenses increased $11.8 million, or
63 percent, from last year as a result of increased levels of
commercial and consumer real estate owned properties.
TCF’s income tax expense was $45.9 million for 2009,
or 35 percent of pre-tax income. Income tax expense
for 2009 included a $4.2 million decrease in income tax
expense related to favorable developments in uncertain
tax positions, partially offset by a slight increase in the
effective income tax rate.
2009 Annual Report : 7
even during these difficult times, TCF is committed to
followed. It was a personal honor to have taken part in
the ongoing professional development of its employees
the first coin toss held at TCF Bank Stadium. School spirit
and continues to recognize and motivate hard working
thrived that day and the University of Minnesota beat the
individuals through job promotions, incentive compensation,
U.S. Air Force Academy 20 to 13 — a perfect opening day
tuition reimbursement and other reward programs.
for TCF Bank Stadium.
We strongly believe that maintaining an experienced and
TCF’s investment in the naming rights of this stadium
motivated team creates a competitive advantage and is
gives us both a local branding opportunity as well as
crucial to enhancing stockholder value.
nationwide recognition as the stadium receives national
TCF also continues to support the communities in
exposure in college athletics. In addition to the stadium
which we serve, both financially and through volunteerism.
naming rights, TCF continues to support the University
During 2009, TCF and its employees contributed over
through its campus card relationship, dedicated products
$3 million to charitable organizations in human services,
and programs for the University’s students, staff, faculty
education, community development and the arts. In
and alumni, and a substantial scholarship program for
addition, numerous TCF employees generously gave their
students. We value the significance of student checking
time by volunteering and providing leadership to local
relationships as a long-term investment in what we hope
nonprofit organizations. TCF and its employees continue
to cultivate as lifelong customers at TCF. We are very
to express a commitment to make a difference for people
proud to be a part of a new tradition for the University
in need and for the communities we serve, and we
of Minnesota and for members of our community.
have an ongoing focus on organizations that have TCF
The University of Minnesota represents our largest
employee involvement.
campus commitment; however, TCF also has campus
September 12, 2009 marked the inaugural game at
card and other relationships with eight other colleges
the University of Minnesota’s TCF Bank Stadium®. It was
and universities in the areas we serve.
a momentous day filled with festive pre-game events, a
Gopher Victory Walk to the stadium and an official ribbon
cutting held at the student entrance. excitement filled
To Be Successful in 2010, We Must:
• Continue growth momentum in loans, leases and
the air as fans filled the stands, the Minnesota Marching
deposits. With fewer competitors in the market on
Band bellowed its Minnesota Rouser and the Golden
both the deposit side and the lending side, now is an
Gopher football team ran out onto the field for the first
opportune time to capture deposit customers through
time. Our hearts pounded when U.S. Air Force F-16’s
premium campaigns, new products and cross-sell
soared over the stadium and a spectacular fireworks show
initiatives while lending to creditworthy customers.
trust
TCF has many important assets, but
the most valuable is our established
reputation for honesty and integrity.
Our management practices demand
high standards of ethics. We work hard
to continually earn and keep the trust
and confidence of our customers
and stockholders.
8 : TCF Financial Corporation and Subsidiaries
TCF Bank Stadium
TCF Bank Stadium, the new home of the University of Minnesota’s Golden Gopher football team,
opened its doors on September 12, 2009. It was a proud moment in history for TCF, the University
of Minnesota and members of our community.
As the first Big Ten® stadium built since 1960, TCF Bank Stadium is a state-of-the-art facility
that also blends with the rich past traditions at the University of Minnesota. Its grand presence on
campus invokes school spirit and creates a new sense of community for students, alumni and the
state of Minnesota. TCF has been a part of the community for nearly 90 years and it is fitting that
we have played an instrumental role in creating this stadium, which greatly benefits this region. In
addition to the stadium naming rights, TCF continues to support the University through its campus
card relationship, dedicated products and programs for the University’s students, staff, faculty and
alumni, and a substantial scholarship program for students.
We deeply value our relationship with the University of Minnesota and are excited about being
a part of bringing Golden Gopher football back to campus.
2009 Annual Report : 9
Deposit gathering and loan and lease production are
and card service fees. Litigation against Visa could also
the bread and butter of TCF, and a high priority for our
have an impact on future card revenue. Regulatory issues
entire management team in 2010. Checking account
and the related compliance burden continue to increase
growth provides a low-cost funding base and drives
and impact TCF’s expense. We continue to monitor these
future deposit fee income.
developments but a growing amount of time and dollars
• Carefully monitor credit quality. Our objective in this
are being spent on this effort.
area is to remain conservative through controlled and
• economic climate, with value declines in both homes
thorough credit evaluation, secured lending, and prompt
and commercial real estate, and rising unemployment
accounting for credit losses and the related provisioning.
are major risks for all banks, including TCF.
I expect home values to stabilize and the economy to
begin to improve during the year which should reduce
the rate of loan and lease defaults and reduce credit
losses. Credit quality, however, will largely depend on
the viability of the U.S. economy.
• Use capital wisely. TCF has maintained a solidly
capitalized structure for many years. If in 2010 regulators
increase their capital standards on banks, we will react
accordingly. We will always be good stewards of our
stockholders’ capital and think long-term. Prudent capital
management, which includes making wise investments,
is a top priority.
• Stay innovative in product and service offerings within
the constraints of new regulations. We need to be
flexible and move quickly in response to potential
government mandated controls and restrictions placed on
our products and services, and protect our future profits.
• Continue to review and control expenses. In this
difficult operating environment, it is important to focus on
expense control and in 2010, it will be a team effort of all
TCF employees. We will continue to identify areas within
our business lines to improve processes and efficiencies.
• Continue our longstanding commitment to strong
corporate governance. Our customers and stock holders
entrust us with their money and confidential information
and, therefore, our management practices demand high
standards of ethics. Reputation for honesty and integrity
continues to rank at the top of our priorities.
Risks to Our Business Strategy:
• Congressional and regulatory actions could have an
impact on our business and our ability to generate future
fee income. We do not know what Congress will do next;
they may impose additional regulations on checking fees
• In the current state of the economy, the Federal and
most state governments cannot fund their spending
initiatives. Tax increases on businesses, including TCF,
or individuals to fill the spending gaps in an attempt to
balance their budgets is a risk on multiple fronts to TCF.
• Managing interest rate risk and the continued low
levels of interest rates with an eye toward the possibility
of rapidly increasing inflation continues to be very
challenging.
• Potential reductions in our borrowing capacity because
of restrictions put on the Federal Home Loan Banks or
the Federal Reserve Discount Window could reduce our
liquidity and could inhibit growth or force higher deposit
costs. Growing deposits reduces this risk.
6
.
1
1
$
2
.
0
1
$
0
4
2
,
2
6
2
2
,
2
5
6
2
,
2
7
3
1
,
2
3
7
4
,
2
8
.
9
$
6
.
9
$
1
.
9
$
05
06
07
08
09
05
06
07
08
09
Total Deposits
Billions of Dollars
+13% annual growth rate
(’09 vs. ’08)
Certificates of Deposit
Core Deposits
Checking &
Savings Accounts
Thousands
+9% annual growth rate (’09 vs. ’08)
Saving Accounts
Checking Accounts
10 : TCF Financial Corporation and Subsidiaries
• Changes in customer behavior from the slowing
economy and advances in technology could further
In Closing:
TCF remains a safe and sound financial institution.
impact fee revenue. In addition, changes to our product
Our capital position remains strong and we have access
and service offerings in response to potential legislative
to the capital markets to raise additional equity or debt.
changes could have an impact on customer banking
We have ample liquidity to conduct business. Our commit-
preferences in the future.
• Growth expectations of our new inventory finance
business may not be achieved. This new line of business
has been very successful for TCF; however, the ability
to retain existing business relationships and attract new
customers will become challenging as competitors
re-enter the market.
• A further reduction of the public’s perception of banks.
When public perception sours as a result of bad behavior
from some of the largest players, smaller community
banks like TCF are the ones at risk of being impacted the
most. Therefore, it is important we continue to stick to
our knitting and provide products and services that appeal
to all people.
TCF has prudently managed these types of risks in
the past and we believe we are adequately prepared to
manage them in the future.
6
.
4
1
$
3
.
3
1
$
3
.
2
1
$
3
.
1
1
$
2
.
0
1
$
05
06
07
08
09
Total Loans & Leases
Billions of Dollars
+9% annual growth rate (’09 vs. ’08)
ment to a conservative corporate philosophy has proven
itself time and again over the past 25 years. I am proud
we have held tight to our principles and, as a result, TCF
has remained profitable during a very difficult time while
many others fell short. TCF has a business model that
works and we continue to look for opportunities to create
and deliver stockholder value.
We also continue to have a mutuality of interest with
our stockholders. Our senior management and board
of directors own over 8.7 million shares, or 7 percent
of TCF stock. eighty-three percent of our match-eligible
employees participate in TCF’s employees Stock Purchase
Plan, which at year-end held over 8.2 million shares.
Our compensation systems are largely stock based.
I would like to take this opportunity to thank the board
of directors for their continued dedication, wise counsel
and support of TCF. It was very much appreciated in
2009. During the year, we welcomed Vance Opperman
and Peter Bell to TCF’s board membership. Vance has a
wealth of knowledge and experience in law and financial
services and we welcome his insights to assist TCF
in our continued growth and success. Peter previously
worked at TCF and has expertise in government
services, business development, transportation, higher
education and housing. Both Vance and Peter share a
passion for community service which is unprecedented
and highly commendable. We look forward to their
guidance and counsel.
I would also like to give a special thanks to our employ-
ees for their hard work and efforts during another very
challenging year. Their exceptional abilities, commitment
and energy make everything happen at TCF. I am proud
of the TCF Team and its accomplishments.
Thank you for your continued support and investment
in TCF.
William A. Cooper
Chairman and Chief executive Officer
Board of Directors
2009 Annual Report : 11
William A. Cooper
Chairman of the Board
and Chief Executive Officer,
TCF Financial Corporation
Chairman since 1987
Peter Bell
Chair,
Metropolitan Council
Director since 2009
William F. Bieber
Chairman and Owner,
ATEK Companies, Inc.
Director since 1997
Theodore J. Bigos
Owner,
Bigos Management, Inc.
Thomas A. Cusick
Retired Vice Chairman,
TCF Financial Corporation
Director since 2008
Director since 1988
Luella G. Goldberg
Past Chair,
University of
Minnesota Foundation,
Former Acting President,
Wellesley College
Director since 1988
George G. Johnson
CPA/Managing Director,
George Johnson & Company
Director since 1998
Vance K. Opperman
President and
Chief Executive Officer,
Key Investment, Inc.
Gregory J. Pulles
Vice Chairman
and Secretary,
TCF Financial Corporation
Director since 2009
Director since 2006
Gerald A. Schwalbach
Chairman,
Spensa Development Group, LLC
Director since 1999
Douglas A. Scovanner
Executive Vice President
and Chief Financial Officer,
Target Corporation
Director since 2004
Ralph Strangis
Senior Partner,
Kaplan, Strangis and Kaplan, P.A.
Barry N. Winslow
Vice Chairman,
TCF Financial Corporation
Director since 1991
Director since 2008
12 : TCF Financial Corporation and Subsidiaries
Financial Highlights
(Dollars in thousands, except per-share data)
2009
2008
% Change
At or For the Year ended December 31,
Operating Results:
net interest income
Provision for credit losses
net interest income after provision for credit losses
non-interest income:
Fees and other revenue
Gains on securities, net
Visa share redemption
Total non-interest income
non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Loss attributable to non-controlling interests
net income
Preferred stock dividends
non-cash deemed preferred stock dividend
net income available to common stockholders
Per Common Share Information:
Basic earnings
Diluted earnings
Dividends declared
Stock price:
High
Low
Close
Book value
Price to book value
Financial Ratios:
Return on average assets
Return on average common equity
net interest margin
net charge-offs as a percentage of average loans and leases
Tangible realized common equity to tangible assets
n.M. not Meaningful.
$633,006
258,536
374,470
496,468
29,387
–
525,855
767,784
132,541
45,854
86,687
410
87,097
6,378
12,025
$ 68,694
$593,673
192,045
401,628
474,061
16,066
8,308
498,435
694,403
205,660
76,702
128,958
–
128,958
2,540
–
$126,418
6.6%
34.6
(6.8)
4.7
82.9
(100.0)
5.5
10.6
(35.6)
(40.2)
(32.8)
100.0
(32.5)
n.M.
100.0
(45.7)
$ .54
.54
.40
$ 1.01
1.01
1.00
(46.5)%
(46.5)
(60.0)
16.67
8.74
13.62
9.10
1.50 X
28.00
9.25
13.66
8.99
1.52 X
.49%
.79%
5.95
3.87
1.34
5.86
11.46
3.91
.78
6.01
(0.3)
1.2
(1.5)
(38.0)
(48.1)
(1.0)
71.8
(2.5)
UNITeD STaTeS
SeCURITIeS aND eXCHaNGe COMMISSION
washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2009
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
x
For the transition period from to
Commission File No. 001-10253
TCF Financial Corporation
(Exact name of registrant as specified in its charter)
DelawaRe
(State or other jurisdiction of
incorporation or organization)
41-1591444
(I.R.S. Employer Identification No.)
200 lake Street east, Mail Code eX0-03-a,
wayzata, Minnesota 55391-1693
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: 952-745-2760
Securities registered pursuant to Section 12(b) of the act:
Common Stock (par value $.01 per share)
Warrants
(Title of class)
New York Stock Exchange
New York Stock Exchange
(Name of exchange on which registered)
No
No
No x
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter)
is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
No
Large accelerated filer x Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company) Smaller reporting company
No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
As of June 30, 2009, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed
by reference to the price at which the common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant’s most recently completed second fiscal quarter as reported by the
New York Stock Exchange, was $1,489,988,868.
As of January 29, 2010, there were 129,310,146 shares outstanding of the registrant’s common stock, par value $.01 per share,
its only outstanding class of common stock.
Specific portions of the Registrant’s definitive Proxy Statement dated March 10, 2010 are incorporated by reference into
Part III hereof.
DOCUMeNTS INCORPORaTeD BY ReFeReNCe
Table of Contents
Description
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Other Financial Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Part IV
Item 15.
Signatures
Index to Exhibits
Exhibits, Financial Statement Schedules
Page
1
8
13
13
13
13
14
16
17
43
45
45
46
50
79
79
80
80
81
81
82
83
83
83
83
84
85
86
Part I
Item 1. Business
General
TCF Financial Corporation (“TCF” or the “Company”), a
Delaware Corporation incorporated on April 28, 1987, is a
financial holding company based in Wayzata, Minnesota.
Its principal subsidiary is TCF National Bank (“TCF Bank”),
which is headquartered in Sioux Falls, South Dakota.
TCF Bank operates bank branches in Minnesota, Illinois,
Michigan, Colorado, Wisconsin, Indiana, Arizona and South
Dakota (TCF’s primary banking markets). TCF’s focus is on
the delivery of retail and commercial banking products in
markets served by TCF Bank, and commercial equipment
loans and leases and inventory finance loans throughout
the United States and Canada.
At December 31, 2009, TCF had total assets of $17.9 billion
and was the 34th largest publicly traded bank holding
company in the United States based on total assets as
of September 30, 2009. Unless otherwise indicated,
references herein to “TCF” include its direct and indirect
subsidiaries. References herein to the “Holding Company”
or “TCF Financial” refer to TCF Financial Corporation on an
unconsolidated basis.
TCF’s core businesses include Retail Banking, Wholesale
Banking and Treasury Services. Retail Banking includes
branch banking and retail lending. Wholesale Banking
includes commercial banking, leasing and equipment
finance and inventory finance. Treasury Services includes
the Company’s investment and borrowing portfolios and
management of capital, debt and market risks, including
interest-rate and liquidity risks. See “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Financial Condition Analysis
— Operating Segment Results” and Note 23 of Notes to
Consolidated Financial Statements for information regarding
TCF’s reportable operating segments.
Retail Banking
At December 31, 2009, TCF had 443 retail banking branches,
consisting of 197 traditional branches, 233 supermarket
branches and 13 campus branches. TCF operates 202 branches
in Illinois, 110 in Minnesota, 56 in Michigan, 36 in Colorado,
2009 Form 10-K : 1
26 in Wisconsin, seven in Arizona, five in Indiana and one in
South Dakota.
Campus banking represents an important part of TCF’s
Retail Banking business. TCF has alliances with the
University of Minnesota, the University of Michigan, the
University of Illinois and six other colleges. These alliances
include exclusive marketing, naming rights and other
agreements. Branches have been opened on many of these
college campuses. TCF provides multi-purpose campus
cards for many of these colleges. These cards serve as a
school identification card, ATM card, library card, security
card, health care card, phone card and stored value card
for vending machines or similar uses. TCF is ranked 5th
largest in number of campus card banking relationships
in the U.S. At December 31, 2009, there were $251.3 million
in campus deposits. TCF has a 25-year naming rights
agreement with the University of Minnesota to sponsor its
new football stadium called “TCF Bank Stadium®” which
opened in September, 2009.
Non-interest income is a significant source of revenue
for TCF and an important factor in TCF’s results of operations.
Increasing fee and service charge revenue has been challeng-
ing as a result of changing customer behavior. Providing a
wide range of retail banking services is an integral compo-
nent of TCF’s business philosophy and a major strategy for
generating additional non-interest income. Key drivers of
non-interest income are the number of deposit accounts
and related transaction activity. Regulations issued in
November of 2009 will restrict the imposition of overdraft
fees and could have a significant adverse impact on TCF’s
non-interest income.
In response to these new regulations, TCF is implementing
several changes to its checking products including charging
certain customers a monthly maintenance fee if they fail
to meet certain account requirements. See “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Income Statement and
Analysis — Non-Interest Income” and “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Forward-Looking Information” for addi-
tional information.
2 : TCF Financial Corporation and Subsidiaries
Lending Activities
General TCF’s lending activities reflect its community
banking philosophy, emphasizing secured loans to indi-
viduals and businesses in its primary market areas. TCF
is also engaged in leasing and equipment finance and
in 2008 began conducting inventory finance activities.
These activities are conducted throughout the United
States and in Canada. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations
— Consolidated Financial Condition Analysis — Loans and
Leases” and Note 5 of Notes to Consolidated Financial
Statements for additional information regarding TCF’s
loan and lease portfolios.
Retail lending TCF makes consumer loans for personal,
family or household purposes, such as home purchases,
debt consolidation, financing of home improvements,
automobiles, vacations and education.
TCF’s retail lending origination activity primarily consists
of consumer real estate secured lending. It also includes
originating loans secured by personal property and, to a
limited extent, unsecured personal loans. Consumer loans
may be made on a revolving line of credit or fixed-term basis.
TCF does not have any subprime lending programs nor has it
originated 2/28 adjustable-rate mortgages (ARM) or option
ARM loans.
Commercial Real estate lending Commercial real
estate loans are loans originated by TCF that are secured
by commercial real estate which includes, retail centers,
office buildings, multi-family housing and to a lesser
extent, commercial real estate construction loans, mainly
to borrowers based in its primary markets.
Commercial Business lending Commercial business
loans are loans originated by TCF that are generally secured
by various types of business assets including inventory,
receivables, equipment and financial instruments. In very
limited cases, loans may be originated on an unsecured
basis. Commercial business loans are used for a variety of
purposes including working capital and financing the
purchase of equipment.
TCF concentrates on originating commercial business
loans to middle-market companies with borrowing require-
ments of less than $25 million. Substantially all of TCF’s
commercial business loans outstanding at December 31,
2009, were to borrowers based in its primary markets.
leasing and equipment Finance TCF provides a broad
range of comprehensive lease and equipment finance
products addressing the financing needs of diverse types
of small to large companies. TCF’s leasing and equipment
finance businesses, TCF Equipment Finance, Inc. (“TCF
Equipment Finance”) and Winthrop Resources Corporation
(“Winthrop Resources”), finance equipment in all 50 states
and, to a limited extent, in foreign countries. TCF Equipment
Finance delivers equipment finance solutions to small and
mid-size companies in various industries with significant
diversity in the types of underlying equipment. Winthrop
Resources focuses on providing customized lease financing
to meet the special needs of mid-size and large companies
and health care facilities that procure high-tech equipment
such as computers, servers, telecommunication and other
technology equipment. During 2009, Winthrop Resources
acquired all of the outstanding shares of Fidelity National
Capital, Inc. (“FNCI”), which provides technology financing
and leasing solutions similar to those provided by Winthrop.
Inventory Finance TCF’s Inventory Finance business
originates commercial variable rate loans which are
secured by the underlying floorplanned equipment and
supported by repurchase agreements from original equip-
ment manufacturers, with a focus on consumer electronics,
household appliances and lawn and garden products.
TCF Inventory Finance operates primarily in the U.S. with
a presence in Canada and commenced lending operations
in December of 2008. In the third quarter of 2009, TCF
Inventory Finance formed a joint venture with The Toro
Company (“Toro®”) called Red Iron Acceptance, LLC
(“Red Iron”). Red Iron provides U.S. distributors and dealers
and select Canadian distributors of the Toro and Exmark®
brands with reliable, cost-effective sources of financing.
TCF and Toro will maintain a 55% and 45% ownership
interest, respectively, in Red Iron.
Investment Activities
TCF Bank has authority to invest in various types of liquid
assets, including United States Department of the Treasury
(“U.S. Treasury”) obligations and securities of various
federal agencies and U.S. Government sponsored enterprises,
deposits of insured banks, bankers’ acceptances and federal
funds. TCF Bank’s investments do not include commercial
paper, asset-backed commercial paper, asset-backed
securities secured by credit cards or auto loans, trust
preferred securities or preferred stock of Fannie Mae or
Freddie Mac. TCF Bank also does not participate in struc-
tured investment vehicles and does not have any bank-
owned life insurance. Liquidity may increase or decrease
depending upon the availability of funds and comparative
yields on investments in relation to the returns on loans and
leases. TCF Bank must also meet reserve requirements of the
Federal Reserve Board, which are imposed based on amounts
on deposit in various deposit categories.
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 and competitive conditions, interest rates,
money market conditions and other factors. Consumer,
small business and commercial deposits are attracted
from within TCF’s primary market areas through the offer-
ing of a broad selection of deposit instruments including
consumer, small business and commercial demand deposit
accounts, interest-bearing checking accounts, money
market accounts, regular savings accounts, certificates
of deposit and retirement savings plans.
TCF’s marketing strategy emphasizes attracting core
deposits held in checking, savings, money market and cer-
tificate of deposit accounts. These accounts are a source of
low-interest cost funds and provide significant fee income.
Information concerning TCF’s deposits is set forth
in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Consolidated
Financial Condition Analysis — Deposits” and in Note 9 of
Notes to Consolidated Financial Statements.
Borrowings Borrowings may be used to compensate for
reductions in deposit inflows or net deposit outflows,
or to support expanded lending and leasing activities.
These borrowings may include Federal Home Loan Bank
(“FHLB”) advances, repurchase agreements, federal
funds, advances from the Federal Reserve Discount
Window and other borrowings.
TCF Bank, as a member of the FHLB system, is required
to own a minimum level of FHLB stock and is authorized to
apply for advances on the security of such stock, mortgage-
backed securities, loans secured by real estate and other
assets (principally securities which are obligations of, or
2009 Form 10-K : 3
guaranteed by, the United States Government), provided
certain standards related to creditworthiness have been
met. 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. 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 an additional source of funds, TCF may sell securities
subject to its obligation to repurchase these securities
(repurchase agreements) with major investment banks
or the FHLB utilizing government securities or mortgage-
backed securities as collateral. Generally, securities with
a value in excess of the amount borrowed are required to
be deposited as collateral with the counterparty to a repur-
chase agreement. The creditworthiness of the counterparty
is important in establishing that the overcollateralized
amount of securities delivered by TCF is protected. TCF only
enters into repurchase agreements with institutions with a
satisfactory credit profile.
Information concerning TCF’s FHLB advances, repurchase
agreements, subordinated notes, junior subordinated
notes (trust preferred) and other borrowings is set forth
in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Consolidated
Financial Condition Analysis — Borrowings” and in Notes 10
and 11 of Notes to Consolidated Financial Statements.
Other Information
activities of Subsidiaries of TCF Financial
Corporation TCF’s business operations include those con-
ducted by direct and indirect subsidiaries of TCF Financial,
all of which are consolidated for purposes of preparing
TCF’s consolidated financial statements. TCF does not utilize
unconsolidated subsidiaries or special purpose entities
to provide off-balance sheet borrowings. TCF Bank
subsidiaries principally engage in the following activities.
Leasing and Equipment Finance See “Item 1.
Business — Lending Activities” for information on TCF’s
leasing and equipment finance business.
4 : TCF Financial Corporation and Subsidiaries
Inventory Finance See “Item 1. Business — Lending
Activities” for information on TCF’s inventory finance business.
Competition TCF competes with a number of depository
institutions and financial service providers in its market
areas, and experiences significant competition in attracting
and retaining deposits and in lending funds. Direct competi-
tion for deposits comes primarily from banks, savings
institutions, credit unions and investment banks. Additional
significant competition for deposits comes from institutions
selling money market mutual funds and corporate and
government securities. TCF competes for the origination of
loans with banks, mortgage bankers, mortgage brokers,
consumer and commercial finance companies, credit unions,
insurance companies and savings institutions. TCF also
competes nationwide with other companies and banks in
the financing of equipment and inventory. Expanded use
of the Internet has increased competition affecting TCF
and its loan, lease and deposit products.
employees As of December 31, 2009, TCF had 7,573
employees, including 2,435 part-time employees. TCF
provides its employees with a comprehensive program of
benefits, some of which are provided on a contributory
basis, including comprehensive medical and dental plans,
a 401(k) savings plan with a company matching contribution,
life insurance and short- and long-term disability coverage.
Regulation
The banking industry is generally subject to extensive
regulatory oversight. TCF Financial, as a publicly held
financial holding company, and TCF Bank, which has deposits
insured by the Federal Deposit Insurance Corporation
(“FDIC”), are subject to a number of laws and regulations.
Many of these laws and regulations have undergone signifi-
cant change in recent years. These laws and regulations
impose restrictions on activities, minimum capital require-
ments, lending and deposit restrictions and numerous other
requirements. Future changes to these laws and regulations,
and other new financial services laws and regulations, are
likely and cannot be predicted with certainty. TCF Financial’s
primary regulator is the Federal Reserve Bank (“FRB”) and
TCF Bank’s primary regulator is the Office of the Comptroller
of the Currency (“OCC”).
Regulatory Capital Requirements TCF Financial and
TCF Bank are subject to regulatory capital requirements
of the FRB and the OCC, respectively, as described below.
These regulatory agencies are required by law to take
prompt action when institutions are viewed to be unsafe
or unsound or do not meet certain 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.”
It requires that regulatory authorities subject undercapital-
ized institutions to various restrictions such as limitations
on dividends or other capital distributions, limitations on
growth or restrictions on activities. Undercapitalized banks
must develop a capital restoration plan and the parent
financial holding company is required to guarantee compli-
ance with the plan. TCF Financial and TCF Bank are “well-
capitalized” under the FDICIA capital standards.
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 appli-
cable to TCF Financial and TCF Bank. The ability of TCF
Financial and TCF Bank to comply with regulatory capital
requirements may be adversely affected by legislative
changes, future rulemaking or policies of regulatory
authorities, unanticipated losses or lower levels of earnings.
Restrictions on Distributions TCF Financial’s ability to
pay dividends is subject to limitations imposed by the FRB. In
general, FRB regulatory guidelines call upon a bank holding
company’s board of directors to take a number of factors into
account when considering the payments of dividends, including
the quality and level of current and prospective earnings.
Dividends or other capital distributions from TCF Bank
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 borrowings, or for its other
cash needs. The ability of TCF Financial and TCF Bank to pay
dividends is 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, TCF Bank may not declare or pay a dividend
to TCF Financial in excess of 100% of its net retained profits
for the current year combined with its net retained profits
for the preceding two calendar years without prior approval
of the OCC. TCF Bank’s ability to make capital distributions
in the future may require regulatory approval and may be
restricted by its regulatory authorities. TCF Bank’s ability to
make any such distributions will also depend on its earnings
and ability to meet minimum regulatory capital requirements
in effect during future periods. These capital adequacy
standards may be higher in the future than existing minimum
regulatory 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,
income tax considerations may limit the ability of TCF Bank
to make dividend payments in excess of its 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. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations
— Consolidated Financial Condition Analysis — Liquidity
Management” and Notes 13 and 14 of Notes to Consolidated
Financial Statements.
Regulation of TCF and affiliates and Insider
Transactions TCF Financial is subject to FRB regulations,
examinations and reporting requirements relating to bank
or financial holding companies. Bank subsidiaries of financial
holding companies like TCF Bank are subject to certain
restrictions in their dealings with holding company affiliates.
A holding company must serve as a source of strength
for its subsidiary banks, and the FRB may require a holding
company to contribute additional capital to an under-
capitalized 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
Board of Directors must cause the sale of the shareholder’s
stock at public auction to cover a deficiency in the capital
of a subsidiary bank. In the event of a holding company’s
bankruptcy, any commitment by the holding company to
2009 Form 10-K : 5
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”), FRB
approval is required before acquiring more than 5% control,
or substantially all of the assets, of another bank, or bank
or financial holding company, or merging or consolidating
with such a bank or holding company. The BHCA also gener-
ally prohibits a bank holding company, with certain excep-
tions, 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 to the business of banking.
Restrictions on Change in Control Federal and state
laws and regulations contain a number of provisions which
impose restrictions on changes in control of financial
institutions such as TCF Bank, and which require regulatory
approval prior to any such changes in control. The Restated
Certificate of Incorporation of TCF Financial contains fea-
tures 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
by adopting a law after the date of enactment of such 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 branches are located permits such acquisitions.
Interstate mergers and branch acquisitions may also be
subject to certain nationwide and statewide insured
deposit maximum concentration levels or other limitations.
Insurance of accounts The deposits of TCF Bank have
historically been insured by the FDIC up to $100,000 per
insured depositor, except certain types of retirement
accounts, which are insured up to $250,000 per insured
6 : TCF Financial Corporation and Subsidiaries
depositor. On October 3, 2008, the maximum amount
insured under FDIC deposit insurance was temporarily
increased from $100,000 to $250,000 per insured depositor
through December 31, 2009. This increase was part of the
Emergency Economic Stabilization Act of 2008. In May 2009,
the increase was extended through December 31, 2013.
Additionally, TCF has elected to participate in the FDIC’s
Temporary Liquidity Guarantee Program. Under this
program, all non-interest bearing deposit transaction
accounts at TCF with balances over $250,000 were fully
insured through December 31, 2009 at an additional cost
to TCF of 10 basis points per dollar over $250,000 on a per
account basis. This program was extended through June 30,
2010 at an additional cost to TCF of 15 basis points per
dollar over $250,000 on a per account basis.
The FDIC has set a designated reserve ratio of 1.25%
($1.25 against $100 of insured deposits) for the Deposit
Insurance Fund (“DIF”). The Federal Deposit Insurance Act
of 2005 (“FDIC Act”) provides the FDIC Board of Directors
the authority to set the designated reserve ratio between
1.15% and 1.50%. The FDIC must adopt a restoration plan
when the reserve ratio falls below 1.15% and begin paying
dividends when the reserve ratio exceeds 1.35%. There is no
requirement to achieve a specific ratio within a given time
frame. The DIF reserve ratio calculated by the FDIC in effect
at September 30, 2009 was a negative .16%.
In 2009, the annual insurance premiums on bank
deposits insured by the DIF varied between $.07 per $100
of deposits for banks classified in the highest capital
and supervisory evaluation categories to $.78 per $100
of deposits for banks classified in the lowest capital and
supervisory evaluation categories. TCF Bank was classified
in the highest capital and supervisory evaluation category.
As required by law, in October 2008, the FDIC Board
adopted a restoration plan that would increase the reserve
ratio to the 1.15% threshold within five years. As part of
that plan, in December 2008, the FDIC Board of Directors
voted to increase risk-based assessment rates uniformly
by seven cents, on an annual basis, for the first quarter
of 2009 due to deteriorating financial conditions in the
banking industry. In February 2009, the FDIC extended the
length of the period during which the reserve ratio must be
restored to 1.15% from five years to seven years. TCF Bank
paid a FDIC special assessment of $8.2 million in 2009 in
addition to higher premium rates.
On November 12, 2009, the FDIC adopted a final rule requir-
ing depository institutions to prepay their estimated quarterly
insurance premium for fourth quarter 2009 and all of 2010,
2011 and 2012. TCF Bank prepaid $77.6 million of such premium
on December 30, 2009. The expense related to this prepayment
is anticipated to be recognized over the next three years
based on actual calculations of quarterly provisions.
In addition to risk-based deposit insurance premiums,
additional assessments may be imposed by the Financing
Corporation, a separate U.S. government agency affiliated
with the FDIC, on insured deposits to pay for the interest
cost of Financing Corporation bonds. Financing Corporation
assessment rates for 2009 ranged from $.0102 to $.0114
per $100 of deposits. Financing Corporation assessments
of $1.2 million, $1.1 million and $1.1 million were paid by
TCF Bank for 2009, 2008 and 2007, respectively.
The FDIC is authorized to terminate a depository institu-
tion’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 would likely 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 a number of restrictions
or new requirements on institutions found to be operating
in an unsafe or unsound manner, including but not limited
to growth limitations, dividend restrictions, individual
increased regulatory capital requirements, increased loan,
lease 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, employ-
ees, agents or independent contractors. Under the Bank
Secrecy Act, the OCC is obligated to take enforcement
action where it finds a statutory or regulatory violation
that would constitute a program violation. In its examina-
tions of TCF’s compliance with the Bank Secrecy Act, the OCC
has identified instances of non-compliance that constitute
a program violation. The OCC has not yet determined the
type or duration of such enforcement action.
To the extent not subject to preemption by the OCC,
subsidiaries of TCF may also be subject to state and/or
self-regulatory organization licensing, regulation and
examination requirements in connection with certain
insurance activities.
National Bank Investment limitations Permissible
investments by national banks are limited by the National
Bank Act and by rules of the OCC. Non-traditional bank
activities permitted by the Gramm-Leach-Bliley Act will
subject a bank to additional regulatory limitations or
requirements, including a required regulatory capital
deduction and application of transactions with affiliates
limitations in connection with such activities.
laws and Regulations TCF is subject to a wide array
of other laws and regulations, including, but not limited
to, usury laws, USA Patriot and Bank Secrecy Acts, the
Community Reinvestment Act and related regulations, the
Equal Credit Opportunity Act and Regulation B, Regulation
D reserve requirements, Electronic Funds Transfer Act and
Regulation E, the Truth-in-Lending Act and Regulation Z,
the Real Estate Settlement Procedures Act and Regulation X,
the Expedited Funds Availability Act and Regulation CC,
and the Truth-in-Savings Act and Regulation DD. TCF is also
subject to laws and regulations that may impose liability
2009 Form 10-K : 7
on lenders and owners for clean-up costs and other costs
stemming from hazardous waste located on property
securing real estate loans.
Taxation
Federal Taxation The statute of limitations on TCF’s con-
solidated federal income tax return is closed through 2006.
State Taxation TCF and/or its subsidiaries currently file
tax returns in all states which impose corporate income and
franchise taxes and local tax returns in certain cities and
other taxing jurisdictions. TCF’s primary banking activities
are in the states of Minnesota, Illinois, Michigan, Colorado,
Wisconsin, Indiana, Arizona and South Dakota. The methods
of filing, and the methods for calculating taxable and
apportionable income, vary depending upon the laws of the
taxing jurisdiction. See “Risk Factors.”
See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Consolidated
Income Statement Analysis — Income Taxes” and Notes 1
and 12 of Notes to Consolidated Financial Statements for
additional information regarding TCF’s income taxes.
Available Information
TCF’s website, ir.tcfbank.com, includes free access to
Company news releases, investor presentations, conference
calls to discuss published financial results, TCF’s Annual
Report and periodic filings required by the Securities and
Exchange Commission (“SEC”), including annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to those reports as soon as
reasonably practicable after electronic filing or furnishing
of such material to the SEC.
TCF’s Compensation/Nominating/Corporate Governance
Committee and Audit Committee charters, Corporate
Governance Guidelines, Codes of Ethics and changes to
Codes of Ethics and information on all TCF’s securities are
also available on this website. Stockholders may request
these documents in print free of charge by contacting the
Corporate Secretary at TCF Financial Corporation, 200 Lake
Street East, Mail Code EX0-03-A, Wayzata, MN 55391-1693.
8 : TCF Financial Corporation and Subsidiaries
Item 1A. Risk Factors
Enterprise Risk Management
In the normal course of business, TCF is exposed to various
risks. Management balances the Company’s strategic goals,
including revenue and profitability objectives, with the
associated risks.
In defining the Company’s risk profile, management
organizes risks into three main categories: Credit Risk,
Market Risk (which includes interest-rate risk, liquidity
risk and price risk) and Operational Risk (which includes
transaction risk and compliance risk). Policies, systems
and procedures have been adopted which are intended to
identify, assess, control, monitor, and manage risk in each
of these areas.
Primary responsibility for risk management lies with
the heads of various business lines within the Company.
Each business line within the Company maintains policies,
systems and procedures which are intended to identify,
assess, control, monitor, and manage risk within each area.
Management continually reviews the adequacy and effec-
tiveness of these policies, systems and procedures.
As an integral part of the risk management process,
management has established various committees consisting
of senior executives and others within the Company. The
purpose of these committees is to closely monitor risks
and ensure that adequate risk management practices exist
within their respective areas of authority. Some of the
principal committees include the Credit Policy Committee,
Asset/Liability Management Committee (“ALCO”), Investment
Committee, Capital Planning Committee and various
financial reporting and compliance-related committees.
Overlapping membership of these committees by senior
executives and others helps provide a unified view of risk
on an enterprise-wide basis.
To provide an enterprise-wide view of the Company’s
risk profile, an enterprise risk management governance
process has been established. This includes appointment
of an Enterprise Risk Management Officer, who oversees
the process and reports on the Company’s risk profile.
Additionally, risk officers are assigned to each significant
line of business. The risk officers, while reporting directly
to their respective line, facilitate implementation of the
enterprise risk management and governance process. An
Enterprise Risk Management Committee consisting of senior
executives and others within the Company, oversees and
supports the Enterprise Risk Management Officer.
The Board of Directors, through its Audit Committee,
has overall responsibility for oversight of the Company’s
enterprise risk management governance process.
Credit Risk Management Credit risk is defined as the risk
to earnings or capital if an obligor fails to meet the terms
of any contract with the Company or otherwise fails to
perform as agreed. This includes failure of customers and
counterparties to meet their contractual obligations, and
contingent exposures from unfunded loan commitments
and letters of credit. Credit risk also includes failure of a
counterparty to settle a securities transaction on agreed-
upon terms (such as the counterparty in a repurchase
transaction) or failure of an issuer in connection with
mortgage-backed securities held in the Company’s securities
available for sale portfolio. The Company manages securities
transaction risk by monitoring all unsettled transactions.
All counterparties and transaction limits are reviewed and
approved annually by both ALCO and the Company’s senior
credit committee. To further manage credit risk in the
securities available for sale portfolio, over 99% of the
securities held in the securities available for sale portfolio
are issued and guaranteed by Fannie Mae or Freddie Mac.
To manage credit risk arising from lending and leasing
activities, management has adopted and maintains sound
underwriting policies and procedures, and periodically
reviews the appropriateness of these policies and procedures.
Customers are evaluated as part of the initial underwriting
processes and through periodic reviews. For consumer
loans, credit scoring models are used to help determine
eligibility for credit and terms of credit. These models are
periodically reviewed to verify they are predictive of
borrower performance. Limits are established on the
exposure to a single customer (including their affiliates)
and on concentrations for certain categories of customers.
Loan and lease credit approval levels are established so
that larger credit exposures receive managerial review at
the appropriate level through various credit committees.
Management continuously monitors asset quality in
order to manage the Company’s credit risk and determine
the appropriateness of valuation allowances. This includes,
in the case of commercial loans and leases, a risk rating
methodology under which a rating (1 through 9) is assigned
to every loan and lease. The rating reflects management’s
assessment of the level of the customer’s financial stress
which may impact repayment. Asset quality is monitored
separately based on the type or category of loan or lease.
This allows management to better define the Company’s
loan and lease portfolio risk profile. Management also
uses various risk models to estimate probable impact
on payment performance under various expected or unex-
pected scenarios.
With weak economic conditions throughout 2009 and
into 2010, credit risk may continue to increase. A weakening
economy, increasing unemployment or further deterioration
of housing markets could result in increased credit losses.
Market Risk Management (Including Interest-Rate
Risk and liquidity Risk) Market risk is defined as the
potential for losses arising from changes in interest rates,
equity prices, and other relevant market rates or prices,
and includes interest-rate risk, liquidity risk and price
risk. Interest-rate risk and liquidity risk are the Company’s
primary market risks.
Interest-Rate Risk Interest-rate risk is defined as the
exposure of net interest income and fair value of financial
instruments (interest-earning assets, deposits and borrow-
ings) to adverse movements in interest rates. Interest-rate
risk arises mainly from the structure of the balance sheet.
The primary goal of interest-rate risk management is to
control exposure to interest-rate risk within acceptable
tolerances established by ALCO and the Board of Directors.
The major sources of the Company’s interest-rate risk
are timing differences in the maturity and repricing charac-
teristics of assets and liabilities, changes in relationships
between rate indices (basis risk), changes in customer
behavior and changes in the shape of the yield curve.
Management measures these risks and their impact in
various ways, including use of simulation analyses and
valuation analyses.
Simulation analyses are used to model net interest
income from asset and liability positions over a specified
time period (generally one year), and the sensitivity of net
interest income under various interest rate scenarios. The
interest rate scenarios may include gradual or rapid changes
in interest rates, spread narrowing and widening, yield curve
twists, and changes in assumptions about customer behavior
in various interest rate scenarios. The simulation analyses
are based on various key assumptions which relate to the
2009 Form 10-K : 9
behavior of interest rates and spreads, changes in product
balances, the repricing characteristics of products, and the
behavior of loan and deposit customers in different rate
environments. The simulation analyses do not necessarily
take into account actions management may undertake in
response to anticipated changes in interest rates.
In addition to valuation analyses, management uti-
lizes an interest rate gap measure (difference between
interest-earning assets and interest-bearing liabilities
repricing within a given period). While the interest rate gap
measurement has some limitations, including no assump-
tions regarding future asset or liability production and
a static interest rate assumption, the interest rate gap
represents the net asset or liability sensitivity at a point in
time. An interest rate gap measure could be significantly
affected by external factors such as loan prepayments,
early withdrawals of deposits, changes in the correlation
of various interest-bearing instruments, competition or a
rise or decline in interest rates. See “Item 7A. Quantitative
and Qualitative Disclosures About Market Risk” for further
information about TCF’s interest-rate risk, gap analysis and
simulation analyses.
Management also uses valuation analyses to measure
risk in the balance sheet that might not be taken into
account in the net interest income simulation analyses.
Net interest income simulation highlights exposure over
a relatively short time period (12 months), and valuation
analysis incorporates all cash flows over the estimated
remaining life of all balance sheet positions. The valuation
of the balance sheet, at a point in time, is defined as the
discounted present value of asset cash flows minus the
discounted value of liability cash flows. Valuation analysis
addresses only the current balance sheet and does not
incorporate the growth assumptions that are used in the
net interest income simulation model. As with the net
interest income simulation model, valuation analysis is
based on key assumptions about the timing and variability
of balance sheet cash flows. It also does not take into
account actions management may undertake in response
to anticipated changes in interest rates.
ALCO meets regularly and is responsible for reviewing
the Company’s interest rate sensitivity position and estab-
lishing policies to monitor and limit exposure to interest-
rate risk.
10 : TCF Financial Corporation and Subsidiaries
Liquidity Risk Liquidity risk is defined as the risk to
earnings or capital arising from the Company’s inability to
meet its obligations when they come due without incurring
unacceptable losses. The primary goal of liquidity risk
management is to ensure that the Company’s entire
funding needs are met promptly, in a cost-efficient and
reliable manner.
ALCO and the Board of Directors have adopted a
Liquidity Management Policy to direct management of the
Company’s liquidity risk. Under the Liquidity Management
Policy, the Treasurer reviews current and forecasted funding
needs for the Company and periodically reviews market
conditions for issuing debt securities to wholesale inves-
tors. Key liquidity ratios and the amount available from
alternative funding sources are reported to ALCO on a
monthly basis.
Deposits are TCF’s primary source of funding. In
addition, TCF maintains secured sources of funding, which
include $1.9 billion in secured borrowing capacity at the
Federal Home Loan Bank of Des Moines and $708 million
of secured borrowing capacity at the Federal Reserve
Discount Window. TCF’s secured borrowing capacity with
the FHLB is dependent upon the maintenance by TCF of a
Borrowing Base Certificate which pledges consumer and
commercial real estate loans to the FHLB under a blanket
lien. In addition, the FHLB relies upon its own internal
credit analysis of TCF’s financial results when determining
TCF’s secured borrowing capacity. Should the FHLB lower
TCF’s internal issuer credit rating, TCF’s secured borrowing
capacity could be reduced, TCF could be required to change
collateral from a blanket lien to physically delivering loan
files which would be held at the FHLB, or both.
TCF has developed and maintains a contingency funding
plan should certain liquidity needs arise.
Additionally, diminished unsecured borrowing capacity
could result from TCF credit rating downgrades and unfavor-
able conditions in the credit markets that restrict or limit
various funding sources.
Other Market Risks Another source of market risk is the
Company’s investment in FHLB stock. The investments in FHLB
stock are required investments related to TCF’s borrowings
from these banks. FHLBs obtain their funding primarily
through issuance of consolidated obligations of the Federal
Home Loan Bank system. The U.S. Government does not
guarantee these obligations, and each of the 12 FHLBs are
generally jointly and severally liable for repayment of each
other’s debt. The FHLB system has experienced financial
stress in recent years, and some of the regional banks within
the FHLB system have suspended or reduced their dividends,
or eliminated the ability of members to redeem capital stock.
The ultimate impact of these developments on the FHLB
system or its programs for advances to members is not clear.
TCF’s investments in the FHLB and ability to obtain FHLB funds
could be adversely impacted if the financial health of the
FHLB system worsens.
Operational Risk Management Operational risk is
defined as the risk of loss resulting from inadequate or
failed internal processes, people, and systems, or external
events. This definition includes transaction risk, which
includes losses from fraud, error, the inability to deliver
products or services, and loss or theft of information.
Transaction risk encompasses product development and
delivery, transaction processing, information technology
systems, and the internal control environment. The
definition of operational risk also includes compliance risk,
which is the risk of loss from violations of, or nonconfor-
mance with laws, rules, regulations, prescribed practices,
or ethical standards.
The Company’s Internal Audit Department periodically
assesses the adequacy and effectiveness of the Company’s
processes for controlling and managing risks in all core
areas of operations. This includes determining whether
internal controls and information systems are properly
designed and adequately tested and reviewed. This also
includes determining whether the system of internal controls
over financial reporting is appropriate for the type and
level of risks posed by the nature and scope of the Company’s
activities. Audit plans are prepared using a risk-based
methodology as well as any concerns identified by
management, the Audit Committee, regulators or the
Company’s independent registered public accounting firm.
Significant issues related to the adequacy of controls,
together with recommendations for improvements to
those controls, are reported to management and the
Audit Committee.
The Company’s Compliance Department and others
charged with compliance responsibilities periodically
assess the adequacy and effectiveness of the Company’s
processes for controlling and managing its principal
compliance risks. Compliance Department audit plans are
prepared using a risk-based methodology as well as any
concerns identified by management, the Audit Committee,
or regulators. Significant issues related to the adequacy of
controls, together with recommendations for improvements
to those controls, are reported to management and the
Audit Committee.
In recent years, banks have needed to expand the
scope and level of Bank Secrecy Act compliance activities
in response to new regulatory guidance and heightened
expectations of regulatory authorities. TCF has an exten-
sive Bank Secrecy Act compliance program that has grown
and been enhanced in many significant respects in recent
years, but its primary regulator, the OCC, has not been
satisfied with certain aspects of TCF’s program. Under the
Bank Secrecy Act, the OCC is obligated to take enforcement
action where it finds a statutory or regulatory violation that
would constitute a program violation. In its examinations
of TCF’s compliance with the Bank Secrecy Act, the OCC has
identified instances of non-compliance that constitute a
program violation. The OCC has not yet determined the type
or duration of such enforcement action.
Other Risks
Declines in Real estate Values Declines in home and
real estate values in TCF’s markets have adversely impacted
results of operations. Like all banks, TCF is subject to the
effects of any economic downturn, and in particular, a
continued decline in real estate values in TCF’s markets
could have a further negative effect on results of opera-
tions. A significant decline in home values would likely lead
to a decrease in new consumer real estate loan originations
and increased delinquencies and defaults in the consumer
real estate loan portfolio and result in increased losses in
this portfolio. A significant decline in commercial real
estate values would likely lead to a reduction of TCF’s
secured interest levels.
economic Conditions In addition to the declines in home
values, the weak economy has also adversely impacted
TCF’s results of operations. Continued weakness of the
economy coupled with high unemployment and decreased
consumer spending could have a further negative effect
on results of TCF’s operations through higher credit losses,
lower transaction-related revenues and lower average
deposit balances.
Customer Behavior Changes in customers’ behavior
regarding use of deposit accounts could result in lower fee
revenue, higher borrowing costs, and higher operational
2009 Form 10-K : 11
costs for TCF. TCF obtains a large portion of its revenue
from its deposit accounts and depends on low-interest cost
deposits as a significant source of funds.
In addition, competition from other financial institutions
or adverse customer reaction to changes in TCF’s products,
in response to new regulations, could result in higher
numbers of closed accounts and increased account
acquisition costs. TCF’s level of success in having customers
opt in under new regulations creates risk to TCF’s revenue.
TCF actively monitors customer behavior and adjusts
policies and marketing efforts accordingly to attract new
and retain existing deposit account customers.
New Product TCF recently introduced a new anchor retail
deposit account product that replaces TCF Totally Free
Checking, and that calls for a monthly maintenance fee on
accounts not meeting certain specific requirements. TCF is
also in the process of implementing new regulatory require-
ments that prohibit financial institutions from charging
NSF fees on point-of-sale and ATM transactions unless
customers opt-in. Customer acceptance of the new product
changes cannot be predicted with certainty, and these
changes may have an adverse impact on TCF’s ability to
generate and retain accounts and on its fee income revenue.
Card Revenue Future card revenues may be impacted by
class action litigation against Visa USA Inc. (Visa USA) and
MasterCard®. Under Visa USA’s Bylaws, TCF has a contingent
obligation to indemnify Visa USA for certain litigation unre-
lated to TCF. See page 26 under Management’s Discussion
and Analysis for details of TCF’s contingent obligation to
indemnify Visa USA for certain litigation.
Merchants are also seeking to develop independent card
products or payment systems that would serve as alterna-
tives to TCF Visa card products. The continued success of
TCF’s various card programs is dependent on the success
and viability of Visa and the continued use by customers
and acceptance by merchants of its cards.
Supermarket Branches The success of TCF’s supermarket
branch expansion is dependent on the continued long-term
success and viability of TCF’s supermarket partners and
TCF’s ability to maintain licenses or lease agreements for its
supermarket locations. At December 31, 2009, TCF had 233
supermarket branches. Supermarket banking continues to
play an important role in TCF’s growth, as these branches
have been consistent generators of account growth and
deposits. TCF is subject to the risk, among others, that its
12 : TCF Financial Corporation and Subsidiaries
license or lease for a location or locations will terminate
upon the sale or closure of that location or locations by
the supermarket partner. Also, an economic slowdown, or
financial or labor difficulties in the supermarket industry,
may reduce activity in TCF’s supermarket branches.
leasing and equipment Finance activities TCF’s
leasing and equipment finance activities are subject to
the risk of cyclical downturns and other adverse economic
developments. In an adverse economic environment, there
may be a decline in the demand for some types of equip-
ment which TCF leases and/or finances, resulting in a
decline in the amount of new equipment being placed in
service as well as the decline in equipment values for
equipment previously placed in service. TCF, like all owners
and lessors of commercial equipment, may also be exposed
to liability claims resulting from injuries or accidents
involving that equipment. TCF seeks to mitigate its overall
exposure to lessor’s liability risk by requiring certain lessees
to furnish evidence of liability insurance prior to lease
inception and to maintain that insurance throughout the
term of the lease and through its own insurance programs.
Inventory Finance TCF has strategic and execution risk
associated with starting the new inventory finance business
as the ability to attract and retain manufacturers and dealers
may not achieve expectations. The core operating risks of
this business are similar to other existing TCF businesses.
Income Taxes TCF is subject to income tax laws which
are often complex and require interpretation. Changes in
income tax laws could negatively impact TCF’s results of
operations. If TCF’s Real Estate Investment Trust (“REIT”)
affiliate fails to qualify as a REIT, or should states enact
legislation taxing REITs or related entities, TCF’s tax
expense would increase. The REIT and related companies
must meet specific provisions of the Internal Revenue
Code and state tax laws. Use of REITs is and has been the
subject of federal and state audits, litigation with state
taxing authorities and tax policy debates by various state
legislatures. In the third quarter of 2009, TCF received
notice from a state taxing authority challenging use of the
REIT and related companies based on a recent court deci-
sion unrelated to TCF and different from the laws in place
for the years in the notice. TCF has complied with the state
income tax laws, intends to vigorously defend its position
and believes the likelihood of loss is remote. Additional
unfavorable tax law changes or unfavorable audit results
could increase TCF’s income taxes. See “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Income Statement Analysis —
Income Taxes” and Note 12 of Notes to Consolidated
Financial Statements for additional information.
Rules and Regulations New or revised tax, accounting,
and other laws, regulations, rules and standards could sig-
nificantly impact strategic initiatives, results of operations,
and financial condition. The financial services industry is
extensively regulated. Federal and state laws and regulations
are designed primarily to protect the deposit insurance funds
and consumers, and not necessarily to benefit a financial
company’s stockholders. These laws and regulations may
impose significant limitations on operations. These limita-
tions, and sources of potential liability for the violation
of such laws and regulations, are described in “Item 1.
Business — Regulation.” These regulations, along with tax
and accounting laws, regulations, rules and standards,
have a significant impact on the ways that financial insti-
tutions conduct business, implement strategic initiatives,
engage in tax planning and make financial disclosures.
These laws, regulations, rules and standards are constantly
evolving and may change significantly over time. The
nature, extent, and timing of the adoption of significant
new laws, changes in existing laws, or repeal of existing
laws may have a material impact on TCF’s business, results
of operations, and financial condition, the effect of which
is impossible to predict. Violations of these laws can result
in enforcement actions which can impact operations.
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.
TCF’s income in future periods may be negatively impacted
by pending state and federal legislative proposals which,
if enacted, could limit interest rates or loan, deposit or
other fees and service charges. Financial institutions have
also increasingly been the subject of class action lawsuits
or in some cases regulatory actions challenging a variety
of practices involving consumer lending and retail deposit-
taking activity.
The Community Reinvestment Act (“CRA”) and fair lending
laws and regulations impose nondiscriminatory lending
requirements on financial institutions. The Department
of Justice and other federal agencies are responsible for
enforcing these laws and regulations. A successful chal-
lenge to an institution’s performance under the CRA or fair
lending laws and regulations could result in a wide variety
of sanctions, including the required payment of damages
and civil money penalties, injunctive relief, imposition
of restrictions on mergers and acquisitions activity, and
restrictions on expansion activity. Private parties may also
have the ability to challenge an institution’s performance
under fair lending laws in private class action litigation.
USa Patriot and Bank Secrecy acts The USA Patriot and
Bank Secrecy Acts require financial institutions to develop
programs to prevent financial institutions from being used
for money laundering and terrorist activities. If such activi-
ties are detected, financial institutions are obligated to file
suspicious activity reports with the U.S. Treasury’s Office of
Financial Crimes Enforcement Network. These rules require
financial institutions to establish procedures for identifying
and verifying the identity of customers seeking to open new
accounts. Failure to comply with these regulations could
result in fines and/or sanctions. In recent years, several
banking institutions have received large fines for non-
compliance with these laws and regulations.
Disruption to Infrastructure The extended disruption of
vital infrastructure could negatively impact TCF’s business,
results of operations, and financial condition. TCF’s opera-
tions depend upon, among other things, its technological
and physical infrastructure, including its equipment and
facilities. Extended disruption of its vital infrastructure
by fire, power loss, natural disaster, telecommunications
failure, computer hacking and viruses, terrorist activity
or the domestic and foreign response to such activity, or
other events outside of TCF’s control, could have a material
adverse impact either on the financial services industry as
a whole, or on TCF’s business, results of operations, and
financial condition.
estimates and assumptions TCF’s consolidated financial
statements conform with generally accepted accounting
principles, which require management to make estimates
and assumptions that affect amounts reported in the
consolidated financial statements. These estimates are
based on information available to management at the time
the estimates are made. Actual results could differ from
those estimates. For further information relating to critical
accounting estimates, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations —
Summary of Critical Accounting Estimates.”
2009 Form 10-K : 13
Item 1B. Unresolved Staff
Comments
None.
Item 2. Properties
Offices At December 31, 2009, TCF owned the buildings
and land for 142 of its bank branch offices, owned the
buildings but leased the land for 27 of its bank branch
offices and leased or licensed the remaining 274 bank
branch offices, all of which are well maintained. Bank
branch properties owned by TCF had an aggregate net book
value of approximately $287.1 million at December 31,
2009. At December 31, 2009, the aggregate net book value
of leasehold improvements associated with leased bank
branch office facilities was $25.7 million. In addition to the
branch offices, TCF owned and leased other facilities with
an aggregate net book value of $42.5 million at December 31,
2009. For more information on premises and equipment,
see Note 7 of Notes to Consolidated Financial Statements.
Item 3. Legal Proceedings
From time to time, TCF is a party to legal proceedings arising
out of its lending, leasing and deposit operations. TCF is,
and expects to become, engaged in a number of foreclo-
sure proceedings and other collection actions as part of its
lending and leasing collection activities. From time to time,
borrowers and other customers, or employees or former
employees have also brought actions against TCF, in some
cases claiming substantial damages. Financial services
companies are subject to the risk of class action litigation,
and TCF has had such actions brought against it from time
to time. Litigation is often unpredictable and the actual
results of litigation cannot be determined with certainty.
Item 4. Submission of Matters
to a Vote of Security Holders
None.
14 : TCF Financial Corporation and Subsidiaries
Part II
Item 5. Market for Registrant’s
Common Equity, Related
Stockholder Matters and Issuer
Purchases of Equity Securities
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 Bloomberg.
2009
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2008
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Dividends
Low Declared
$14.31
16.67
15.83
14.72
$22.04
19.31
28.00
20.00
$ 8.74
11.37
12.71
11.36
$14.65
11.91
9.25
11.22
$.25
.05
.05
.05
$.25
.25
.25
.25
As of January 29, 2010, there were 7,577 holders of
record of TCF’s common stock.
The Board of Directors of TCF Financial has adopted a
Capital Plan and Dividend Policy. The policy defines how
enterprise risk related to capital will be managed, how the
adequacy of capital will be measured and the process by
which capital strategy, capital management and common
stock dividend recommendations will be presented to
TCF’s Board of Directors. TCF’s management is charged
with ensuring that capital strategy actions, including the
declaration of common stock dividends, are prudent,
efficient and provide value to TCF’s shareholders, while
ensuring that past and prospective earnings retention is
consistent with TCF’s capital needs, asset quality and
overall financial condition. The Board of Directors intends
to continue its 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, level of internally generated
common capital excluding earnings, financial condition
and capital requirements, the cash available to pay such
dividends (derived mainly from dividends and distributions
from TCF Bank), as well as regulatory and contractual
limitations and such other factors as the Board of Directors
may deem relevant. In general, TCF Bank may not declare or
pay a dividend to TCF in excess of 100% of its net retained
profits for that year combined with its net retained profits
for the preceding two calendar years without prior approval
of the OCC. Restrictions on the ability of TCF Bank to pay
cash dividends or possible diminished earnings of TCF
may limit the ability of TCF to pay dividends in the future
to holders of its common stock. See “Item 1. Business
— Regulation — Regulatory Capital Requirements,” “Item 1.
Business — Regulation — Restrictions on Distributions” and
Note 14 of Notes to Consolidated Financial Statements.
2009 Form 10-K : 15
The following graph compares the cumulative total stockholder return on TCF Stock over the last five fiscal years with the
cumulative total return of the Standard and Poor’s 500 Stock Index, the SNL All Bank and Thrift Index, and a TCF Financial-
selected group of peer institutions over the same period (assuming the investment of $100 in each index on December 31,
2004 and reinvestment of all dividends).
TCF Stock Performance Chart
Total Return Performance
$140
120
100
80
60
40
e
u
l
a
V
x
e
d
n
I
TCF Financial Corporation
SNL Bank and Thrift Index(1)
S&P 500 Index
TCF 2009 Peer Group (2)
12/31/04
12/31/05
12/31/06
12/31/07
12/31/08
12/31/09
Index
TCF Financial Corporation
SNL Bank and Thrift Index (1)
S&P 500 Index
TCF 2009 Peer Group (2)
12/31/04
100.00
100.00
100.00
100.00
12/31/05
87.12
101.57
104.91
95.39
Period Ending
12/31/06
91.19
118.68
121.48
104.54
12/31/07
61.97
90.50
128.16
80.56
12/31/08
50.18
52.05
80.74
62.34
12/31/09
51.51
51.35
102.11
54.69
(1) Includes all major exchange (NYSE, NYSE Amex, NASDAQ) banks and thrifts in SNL’s converage universe (529 companies as of December 31, 2009).
(2) Consists of the 30 publicly-traded banks and thrifts, 15 of which are immediately larger than and 15 of which are immediately smaller than TCF Financial Corporation
in total assets as of September 30, 2009. The 2009 Peer Group includes: Zions Bancorporation; Huntington Bancshares Incorporated; Popular, Inc.; Synovus Financial
Corporation; New York Community Bancorp, Inc.; First Horizon National Corporation; BOK Financial Corporation; Associated Banc-Corp; People’s United Financial, Inc.;
Astoria Financial Corporation; First BanCorp.; First Citizens BancShares, Inc.; City National Corporation; Commerce Bancshares, Inc.; Webster Financial Corporation; Fulton
Financial Corporation; Cullen/Frost Bankers, Inc.; Flagstar Bancorp, Inc.; CapitalSource Inc.; Valley National Bancorp; First Niagara Financial Group, Inc.; MB Financial,
Inc.; Susquehanna Bancshares, Inc.; W Holding Company, Inc.; BancorpSouth, Inc.; Washington Federal, Inc.; SVB Financial Group; East West Bancorp, Inc.; South Financial
Group, Inc.; and Bank of Hawaii Corporation. Seven of the companies, which were in the 2008 TCF Peer Group, are not in the 2009 Peer Group due to the failure of the com-
pany or changes in asset size. Those seven companies are: Hudson City Bancorp, Inc.; Colonial BancGroup, Inc.; Guaranty Financial Group Inc.; Citizens Republic Bancorp,
Inc.; UCBH Holdings, Inc.; Sterling Financial Corporation; and Wilmington Trust Corporation.
Source : SNL Financial LC and Standard & Poor’s © 2010
The following table summarizes share repurchase activity for the quarter ended December 31, 2009.
Period
October 1 to October 31, 2009
Share repurchase program (1)
Employee transactions (2)
November 1 to November 30, 2009
Share repurchase program (1)
Employee transactions (2)
December 1 to December 31, 2009
Share repurchase program (1)
Employee transactions (2)
N.A. Not Applicable.
Total number
of shares
purchased
Average
price paid
per share
Total shares
purchased as a
part of publicly
announced plan
Number of
shares that may
yet be purchased
under the plan
–
–
–
–
–
–
$ –
$ –
$ –
$ –
$ –
$ –
–
N.A.
–
N.A.
–
N.A.
5,384,130
N.A.
5,384,130
N.A.
5,384,130
N.A.
(1) The current share repurchase authorization was approved by the Board of Directors on April 14, 2007. The authorization was for a repurchase of up to an additional 5% of
TCF’s common stock outstanding at the time of the authorization, or 6.5 million shares. This authorization does not have an expiration date.
(2) Shares withheld pursuant to the terms of awards under the TCF Financial Incentive Stock Program to offset tax withholding obligations that occur upon vesting and release
of restricted shares. The TCF Financial Incentive Stock Program provides that the value of shares withheld shall be the average of the high and low prices of common stock
of TCF Financial Corporation on the date the relevant transaction occurs.
16 : TCF Financial Corporation and Subsidiaries
Item 6. Selected Financial Data
The selected five-year financial summary presented below should be read in conjunction with the Consolidated Financial
Statements and related notes.
Five-Year Financial Summary
Consolidated Income:
Year Ended December 31,
(Dollars in thousands, except per-share data)
Total revenue
Net interest income
Provision for credit losses
Fees and other revenue
Gains on securities
Visa share redemption
Gains on sales of branches
2006
2007
2008
2009
2005
$ 1,158,861 $ 1,092,108 $ 1,091,634 $ 1,026,994 $ 995,932
$ 633,006 $ 593,673 $ 550,177 $ 537,530 $ 517,690
8,586
453,965
10,671
–
258,536
496,468
29,387
–
20,689
485,276
–
–
192,045
474,061
16,066
8,308
56,992
490,285
13,278
–
–
767,784
132,541
45,854
86,687
410
87,097
18,403
–
694,403
205,660
76,702
128,958
–
128,958
2,540
37,894
662,124
372,518
105,710
266,808
–
266,808
–
4,188
649,197
357,108
112,165
244,943
–
244,943
–
13,606
606,936
380,410
115,278
265,132
–
265,132
–
Compound Annual
Growth Rate
1-Year
2009/2008
5-Year
2009/2004
6.1%
6.6
34.6
4.7
82.9
(100.0) –
–
10.6
(35.6)
(40.2)
(32.8)
100.0
(32.5)
N.M.
3.4%
5.2
69.2
1.2
5.4
(100.0)
5.8
(19.2)
(18.7)
(19.4)
100.0
(19.3)
N.M.
$ 68,694 $ 126,418 $ 266,808 $ 244,943 $ 265,132
(45.7)
(21.3)
$ .54 $ 1.01 $ 2.09 $ 1.90 $ 2.00
$ .54 $ 1.01 $ 2.09 $ 1.90 $ 2.00
$ .40 $ 1.00 $ .97 $ .92 $ .85
(46.5)
(46.5)
(60.0)
(22.0)
(21.9)
(6.4)
and real estate
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Loss attributable to
non-controlling interest
Net income
Preferred stock dividends
Net income available to
common stockholders
Per common share:
Basic earnings
Diluted earnings
Dividends declared
Consolidated Financial Condition:
At December 31,
Compound Annual
Growth Rate
1-Year
2009/2008
5-Year
2009/2004
(Dollars in thousands, except per-share data)
Loans and leases
Securities available for sale
Total assets
Checking, savings and money
market deposits
Certificates of deposit
Total deposits
Borrowings
Equity
Book value per common share
Key Ratios and Other Data:
2008
2009
2005
$14,590,744 $13,345,889 $12,494,370 $11,478,255 $10,443,033
1,648,615
13,388,594
1,910,476
17,885,175
1,963,681
15,977,054
1,966,104
16,740,357
1,816,126
14,669,734
2007
2006
10,380,814
1,187,505
11,568,319
4,755,499
1,175,362
7,213,735
1,915,620
9,129,355
2,983,136
998,472
$ 9.10 $ 8.99 $ 8.68 $ 7.92 $ 7.46
7,647,069
2,596,283
10,243,352
4,660,774
1,493,776
7,322,014
2,254,535
9,576,549
4,973,448
1,099,012
7,285,615
2,483,635
9,769,250
3,588,540
1,033,374
9.3%
(2.8)
6.8
35.7
(54.3)
12.9
2.0
(21.3)
1.2
Return on average assets
Return on average common equity
Average total equity to average assets
Net interest margin(1)
Net charge-offs as a percentage of average loans and leases
Number of bank branches
(1) Net interest income divided by average interest-earning assets.
N.M. Not Meaningful.
2009
.49%
5.95
7.20
3.87
1.34
443
2008
.79%
At or For the Year Ended December 31,
2007
1.76%
25.82
6.82
3.94
.30
453
2006
1.74%
24.37
7.15
4.16
.17
453
11.46
7.04
3.91
.78
448
8.8%
3.4
7.6
9.7
(4.2)
7.7
14.1
4.2
5.4
2005
2.08%
28.03
7.43
4.46
.29
453
Item 7. Management’s Discussion
and Analysis of Financial Condition
and Results of Operations
Table of Contents
Overview
Results of Operations
Performance Summary
Operating Segment Results
Consolidated Income Statement Analysis
Net Interest Income
Provision for Credit Losses
Non-Interest Income
Non-Interest Expense
Income Taxes
Consolidated Financial Condition Analysis
Securities Available for Sale
Loans and Leases
Allowance for Loan and Lease Losses
Non-Performing Assets
Repossessed and Returned Equipment
Impaired Loans
Past Due Loans and Leases
Loan Modifications
Potential Problem Loans and Leases
Liquidity Management
Deposits
Borrowings
Contractual Obligations and Commitments
Stockholders’ Equity
Summary of Critical Accounting Estimates
Recent Accounting Developments
Fourth Quarter Summary
Legislative, Legal and Regulatory Developments
Forward-Looking Information
Page
17
18
18
19
19
19
23
23
25
26
27
27
27
31
34
36
36
36
37
37
38
38
39
39
40
40
40
41
41
42
2009 Form 10-K : 17
Management’s discussion and analysis of the consolidated
financial condition and results of operations of TCF Financial
Corporation should be read in conjunction with the consoli-
dated financial statements in Item 8 and selected financial
data in Item 6.
Overview
TCF Financial Corporation, a Delaware corporation, is a
financial holding company based in Wayzata, Minnesota. Its
principal subsidiary, TCF National Bank, is headquartered
in South Dakota. TCF had 443 banking offices in Minnesota,
Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona
and South Dakota at December 31, 2009.
TCF provides convenient financial services through
multiple channels in its primary banking markets. TCF has
developed products and services designed to meet the
needs of all consumers. The Company focuses on attracting
and retaining customers through service and convenience,
including branches that are open seven days a week and
on most holidays, extensive full-service supermarket
branches, automated teller machine (“ATM”) networks
and telephone and internet banking. TCF’s philosophy is to
generate interest income, fees and other revenue growth
through business lines that emphasize higher yielding
assets and low or no interest-cost deposits. The Company’s
growth strategies include new branch expansion, acquisi-
tions and the development of new products and services.
New products and services are designed to build on existing
businesses and expand into complementary products and
services through strategic initiatives.
TCF’s core businesses include Retail Banking, Wholesale
Banking and Treasury Services. Retail Banking includes
branch banking and retail lending. Wholesale Banking
includes commercial banking, leasing and equipment
finance and inventory finance. Treasury Services includes
the Company’s investment and borrowing portfolios and
management of capital, debt and market risks, including
interest-rate and liquidity risks.
18 : TCF Financial Corporation and Subsidiaries
TCF’s lending strategy is to originate high credit quality,
primarily secured, loans and leases. TCF’s largest core
lending business is its consumer real estate loan operation,
which offers fixed- and variable-rate loans and lines of
credit secured by residential real estate properties.
Commercial loans are generally made on local properties
or to local customers. The leasing and equipment finance
businesses consist of TCF Equipment Finance, a company
that delivers equipment finance solutions to businesses in
select markets, and Winthrop Resources, a company that
primarily leases technology and data processing equipment.
TCF’s leasing and equipment finance businesses have
equipment installations in all 50 states and, to a limited
extent, in foreign countries. In December 2008, TCF Inventory
Finance commenced lending operations to provide inventory
financing to businesses in the United States and Canada.
Net interest income, the difference between interest
income earned on loans and leases, securities available
for sale, investments and other interest-earning assets
and interest paid on deposits and borrowings, represented
54.6% of TCF’s total revenue in 2009. Net interest income can
change significantly from period to period based on general
levels of interest rates, customer prepayment patterns,
the mix of interest-earning assets and the mix of interest-
bearing and non-interest bearing deposits and borrowings.
TCF manages the risk of changes in interest rates on its net
interest income through an Asset/Liability Management
Committee and through related interest-rate risk monitor-
ing and management policies. See “Item 1A. Risk Factors”
and “Item 7A. Quantitative and Qualitative Disclosures
about Market Risk” for further discussion.
Non-interest income is a significant source of revenue
for TCF and an important factor in TCF’s results of opera-
tions. Increasing fee and service charge revenue has been
challenging as a result of changing customer behavior.
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. Key drivers of non-interest income are the number
of deposit accounts and related transaction activity. The
Federal Reserve issued a new regulation in November of
2009 that restricts the imposition of overdraft fees which
could have a significant adverse impact on TCF’s non-inter-
est income. Starting on July 1, 2010, TCF will have to ask
their customers to opt in before TCF can assess fees for
ATM and debit card overdraft transactions.
Recent legislative proposals would, if enacted, further
restrict or limit TCF’s ability to impose overdraft fees on
retail checking accounts and interchange fees on debit card
transactions and could have a significant adverse impact
on TCF’s non-interest income.
In response to these new regulations, TCF recently
introduced a new anchor checking account product that
will replace the TCF Totally Free Checking product. The new
product will carry a monthly maintenance fee on accounts not
meeting certain specific requirements. See “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Income Statement Analysis
— Non-Interest Income” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations
— Forward-Looking Information” for additional information.
The Company’s Visa debit card program has grown
significantly since its inception in 1996. TCF is the 10th
largest issuer of Visa Classic debit cards in the United
States, based on sales volume for the three months ended
September 30, 2009, as published by Visa. TCF earns
interchange revenue from customer card transactions paid
primarily by merchants, not TCF’s customers. Card products
represent 23.3% of banking fee revenue for the year ended
December 31, 2009, and change based on customer pay-
ment trends and the number of deposit accounts using the
cards. Visa has significant litigation against it regarding
interchange pricing and there is a risk this revenue could
be impacted by any settlement or adverse rulings in such
litigation. See “Item 1A. Risk Factors — Card Revenue” for
further discussion.
The following portions of Management’s Discussion and
Analysis of Financial Condition and Results of Operations
focus in more detail on the results of operations for 2009,
2008 and 2007 and on information about TCF’s balance
sheet, credit quality, liquidity, funding resources, capital
and other matters.
Results of Operations
Performance Summary TCF reported diluted earnings
per common share of $.54 for 2009, compared with $1.01
for 2008 and $2.09 for 2007. Net income was $87.1 million
for 2009, compared with $129 million for 2008 and $266.8
million for 2007. Net income for 2009 includes a non-cash
deemed preferred stock dividend of $12 million, or
10 cents per common share. Net income for 2007 included
$37.9 million in pre-tax gains on sales of branches and
real estate.
Return on average assets was .49% in 2009, compared
with .79% in 2008 and 1.76% in 2007. Return on average
common equity was 5.95% in 2009, compared with 11.46%
in 2008 and 25.82% in 2007. The effective income tax rate
for 2009 was 34.6%, compared with 37.3% in 2008 and
28.4% in 2007.
Operating Segment Results RETAIL BANKING — Consisting
of retail lending and branch banking, reported net income
of $26.6 million for 2009, down 57% from $61.9 million
in 2008 as a result of higher provision and losses on
consumer real estate loans. Retail Banking net interest
income for 2009 was $403.2 million, up 6.5% from $378.7
million for 2008.
The Retail Banking provision for credit losses totaled
$178 million in 2009, up from $136.6 million in 2008. This
increase was primarily due to increased charge-offs in the
consumer real estate portfolio. Refer to the “Consolidated
Income Statement Analysis — Provision for Credit Losses”
section for further discussion.
Retail Banking non-interest income totaled $418 million
in 2009, as compared with $419.9 million in 2008. Fees
and service charges were $282.3 million for 2009, up 6.7%
from $264.6 million in 2008, primarily due to an increased
number of checking accounts and related fee income. Card
revenues were $104.7 million for 2009, up 1.6% from $103.1
million in 2008. The increase in card revenues was primarily
attributable to an increased number of active cards. See
“Consolidated Income Statement Analysis — Non-Interest
Income” for further discussion.
Retail Banking non-interest expense totaled $599
million in 2009, up 4.8% from $571.8 million in 2008. The
increase was primarily due to a $13.8 million increase in
deposit account premium expenses from new marketing
campaigns which resulted in increased checking account
production along with increases in FDIC premiums and
an $8.2 million FDIC special assessment.
WHOLESALE BANKING — Consisting of commercial bank-
ing, leasing and equipment finance and inventory finance,
reported net income of $31.6 million for 2009, up 44.6%
2009 Form 10-K : 19
from $21.9 million in 2008. Net interest income for 2009
was $206.3 million, up 40.2% from $147.1 million in 2008,
as a result of a $1.1 billion, or 19.8%, increase in average
interest-earning assets.
The provision for credit losses for this operating segment
totaled $78.7 million in 2009, up from $52.8 million in 2008.
The increase in the provision for credit losses from 2008 to
2009 was primarily due to increased net charge-offs and
increased delinquency and non-accrual loans and leases in
commercial lending and leasing and equipment finance.
Wholesale Banking non-interest income totaled $77.2
million in 2009, up $16.6 million from $60.6 million in 2008.
The increase in Wholesale Banking revenues for 2009, com-
pared with 2008, was primarily due to an increase in sales-
type lease revenue and operating lease revenues resulting
from the acquisition of FNCI in September 2009.
Wholesale Banking non-interest expense totaled $156.2
million in 2009, up $37.1 million from $119.1 million in
2008, primarily as a result of increased compensation from
expansion, increased expense for repossessed assets, and
increased operating lease depreciation related to FNCI.
TREASURY SERVICES — Treasury services reported net
income of $27.4 million in 2009, down from $48.6 million
in 2008. The decrease was primarily due to a $60.6 million
decrease in average security balances and an 89 basis point
decrease in average yields earned on securities.
Consolidated Income Statement Analysis
Net Interest Income Net interest income, the difference
between interest earned on loans and leases, securities
available for sale, investments and other interest-earning
assets (interest income), and interest paid on deposits and
borrowings (interest expense), represented 54.6% of TCF’s
total revenue in 2009, 54.4% in 2008 and 50.4% in 2007.
Net interest income divided by average interest-earning
assets is referred to as the net interest margin, expressed
as a percentage. Net interest income and net interest
margin are affected by changes in prevailing short and
long-term interest rates, loan and deposit pricing strate-
gies and competitive conditions, the volume and the mix
of interest-earning assets and interest-bearing liabilities,
the level of non-performing assets, and the impact of
restructured consumer real estate loans.
20 : TCF Financial Corporation and Subsidiaries
The following tables summarize TCF’s average balances, interest, dividends and yields and rates on major categories of
TCF’s interest-earning assets and interest-bearing liabilities.
Year ended
December 31, 2009
Year Ended
December 31, 2008
average
Yields
and
Interest(1) Rates
average
Balance
Average
Yields
and
Interest (1) Rates
Average
Balance
average
Balance
Change
average
Yields
and
Rates
Interest(1) (bps)
$ 375,396
$ 4,370
1.16%
$ 155,839
$ 5,937
3.81%
$ 219,557
$ (1,567)
(265)
80,902
8,487
38
89,427
348,400
106,988
3,061
458,449
155,812
22,544
178,356
9,581
10,644
20,225
192,557
14,797
864,384
958,181
4.92
2.18
.22
4.36
6.43
5.75
8.54
6.26
6.05
4.01
5.69
5.75
3.45
4.25
6.81
8.22
6.20
5.85
8,137
58,556
7,006
73,699
48,413
122,112
122,112
233
202,830
203,063
325,175
325,175
.45
1.24
1.03
1.02
2.53
1.34
1.07
.27
4.64
4.55
2.39
2.05
1,645,544
389,245
17,617
2,052,406
5,421,081
1,862,267
35,849
7,319,197
2,574,818
561,881
3,136,699
166,745
308,929
475,674
2,826,835
179,990
13,938,395
16,366,197
1,157,314
$17,523,511
$ 1,402,442
584,605
265,681
2,252,728
1,802,694
4,732,316
683,030
7,218,040
1,915,467
9,133,507
11,386,235
85,228
4,373,182
4,458,410
13,591,917
15,844,645
416,555
16,261,200
1,261,219
1,092
1,262,311
$17,523,511
2,100,291
–
12,674
2,112,965
5,532,198
1,714,827
132,891
7,379,916
2,127,436
597,071
2,724,507
168,554
366,593
535,147
2,265,391
40
12,905,001
15,173,805
1,158,545
$16,332,350
$ 1,408,657
583,611
231,903
2,224,171
1,830,361
2,812,115
613,543
5,256,019
2,472,357
7,728,376
9,952,547
411,763
4,459,703
4,871,466
12,599,842
14,824,013
359,223
15,183,236
1,149,114
–
1,149,114
$16,332,350
110,502
–
444
110,946
372,067
109,115
9,233
490,415
132,014
31,110
163,124
9,988
18,143
28,131
165,838
4
847,512
964,395
5.26
–
3.50
5.25
6.73
6.36
6.95
6.65
6.21
5.21
5.99
5.93
4.95
5.26
7.32
10.00
6.57
6.36
12,933
48,601
10,099
71,633
85,141
156,774
156,774
8,990
204,958
213,948
370,722
370,722
.71
1.73
1.65
1.37
3.44
2.03
1.58
2.18
4.60
4.39
2.94
2.50
(454,747)
389,245
4,943
(60,559)
(29,600)
8,487
(406)
(21,519)
(34)
218
(328)
(89)
(23,667)
(2,127)
(6,172)
(31,966)
23,798
(8,566)
15,232
(407)
(7,499)
(7,906)
26,719
14,793
16,872
(6,214)
(30)
(61)
159
(39)
(16)
(120)
(30)
(18)
(150)
(101)
(51)
(178)
(37)
(51)
(4,796)
9,955
(3,093)
2,066
(36,728)
(34,662)
(34,662)
(8,757)
(2,128)
(10,885)
(45,547)
(45,547)
(26)
(49)
(62)
(35)
(91)
(69)
(51)
(191)
4
16
(55)
(45)
(111,117)
147,440
(97,042)
(60,719)
447,382
(35,190)
412,192
(1,809)
(57,664)
(59,473)
561,444
179,950
1,033,394
1,192,392
(1,231)
$1,191,161
$ (6,215)
994
33,778
28,557
(27,667)
1,920,201
69,487
1,962,021
(556,890)
1,405,131
1,433,688
(326,535)
(86,521)
(413,056)
992,075
1,020,632
57,332
1,077,964
112,105
1,092
113,197
$1,191,161
(Dollars in thousands)
assets:
Investments and other
U.S. Government sponsored entities: (2)
Mortgage-backed securities
Debentures
Other securities
Total securities available for sale (3)
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate (3)
Consumer – other
Total consumer real estate and other
Commercial real estate:
Fixed- and adjustable-rate
Variable-rate (3)
Total commercial real estate
Commercial business:
Fixed- and adjustable-rate
Variable-rate
Total commercial business
Leasing and equipment finance
Inventory finance
Total loans and leases (4)
Total interest-earning assets
Other assets (5)
Total assets
liabilities and equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
Total non-interest bearing deposits
Interest-bearing deposits:
Checking
Savings
Money market
Subtotal
Certificates of deposit
Total interest-bearing deposits
Total deposits
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
Total interest-bearing liabilities
Total deposits and borrowings
Other liabilities
Total liabilities
Total TCF Financial Corp. stockholders’ equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
Net interest income and margin
bps = basis points.
(1) Tax-exempt income was not significant and thus yields on interest-earning assets and net interest margin have not been presented on a tax equivalent basis. Tax-exempt
$633,006
$ 39,333
$593,673
3.87%
3.91%
(4)
income of $1,394,000 and $1,679,000 was recognized during the years ended December 31, 2009 and 2008, respectively.
(2) Average balance and yield of securities available for sale are based upon the historical amortized cost.
(3) Certain variable-rate loans have contractual interest rate floors.
(4) Average balance of loans and leases includes non-accrual loans and leases, and is presented net of unearned income.
(5) Includes operating leases.
2009 Form 10-K : 21
Year Ended
December 31, 2008
Year Ended
December 31, 2007
Average
Yields
and
Interest(1) Rates
Average
Balance
Average
Yields
and
Interest (1) Rates
Average
Balance
Average
Balance
Change
Average
Yields
and
Rates
Interest(1) (bps)
$ 155,839
$ 5,937
3.81%
$ 178,012
$ 8,237
4.63%
$ (22,173)
$ (2,300)
(82)
110,502
–
444
110,946
372,067
109,115
9,233
490,415
132,014
31,110
163,124
9,988
18,143
28,131
165,838
4
847,512
964,395
5.26
–
3.50
5.25
6.73
6.36
6.95
6.65
6.21
5.21
5.99
5.93
4.95
5.26
7.32
10.00
6.57
6.36
12,933
48,601
10,099
71,633
85,141
156,774
156,774
8,990
204,958
213,948
370,722
370,722
.71
1.73
1.65
1.37
3.44
2.03
1.58
2.18
4.60
4.39
2.94
2.50
2,100,291
–
12,674
2,112,965
5,532,198
1,714,827
132,891
7,379,916
2,127,436
597,071
2,724,507
168,554
366,593
535,147
2,265,391
40
12,905,001
15,173,805
1,158,545
$16,332,350
$ 1,408,657
583,611
231,903
2,224,171
1,830,361
2,812,115
613,543
5,256,019
2,472,357
7,728,376
9,952,547
411,763
4,459,703
4,871,466
12,599,842
14,824,013
359,223
15,183,236
1,149,114
–
1,149,114
$16,332,350
2,213
–
(848)
1,365
(18)
–
(50)
(16)
12,223
(15,877)
(8,326)
(11,980)
17,874
(15,253)
2,621
(865)
(10,804)
(11,669)
18,331
4
(2,693)
(3,628)
(11)
(220)
(191)
(61)
(21)
(241)
(74)
(46)
(241)
(181)
(38)
1,000
(65)
(56)
(20,710)
(16,455)
(7,297)
(44,462)
(29,389)
(73,851)
(73,851)
(2,379)
29,106
26,727
(47,124)
(47,124)
(108)
(91)
(123)
(98)
(121)
(108)
(81)
(276)
8
(15)
(68)
(53)
1,992,272
–
32,291
2,024,563
5,258,299
1,460,685
198,105
6,917,089
1,777,813
608,209
2,386,022
169,776
393,442
563,218
1,915,790
–
11,782,119
13,984,694
1,161,106
$15,145,800
$ 1,444,125
594,979
199,432
2,238,536
1,879,333
2,464,333
604,767
4,948,433
2,461,055
7,409,488
9,648,024
230,293
3,890,054
4,120,347
11,529,835
13,768,371
343,978
14,112,349
1,033,451
–
1,033,451
$15,145,800
108,289
–
1,292
109,581
359,844
124,992
17,559
502,395
114,140
46,363
160,503
10,853
28,947
39,800
147,507
–
850,205
968,023
33,643
65,056
17,396
116,095
114,530
230,625
230,625
11,369
175,852
187,221
417,846
417,846
5.44
–
4.00
5.41
6.84
8.56
8.86
7.26
6.42
7.62
6.73
6.39
7.36
7.07
7.70
–
7.22
6.92
1.79
2.64
2.88
2.35
4.65
3.11
2.39
4.94
4.52
4.54
3.62
3.03
108,019
–
(19,617)
88,402
273,899
254,142
(65,214)
462,827
349,623
(11,138)
338,485
(1,222)
(26,849)
(28,071)
349,601
40
1,122,882
1,189,111
(2,561)
$1,186,550
$ (35,468)
(11,368)
32,471
(14,365)
(48,972)
347,782
8,776
307,586
11,302
318,888
304,523
181,470
569,649
751,119
1,070,007
1,055,642
15,245
1,070,887
115,663
–
115,663
$1,186,550
$593,673
3.91%
$550,177
3.94%
$ 43,496
(3)
(Dollars in thousands)
assets:
Investments and other
U.S. Government sponsored entities: (2)
Mortgage-backed securities
Debentures
Other securities
Total securities available for sale (3)
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate (3)
Consumer — other
Total consumer real estate and other
Commercial real estate:
Fixed- and adjustable-rate
Variable-rate (3)
Total commercial real estate
Commercial business:
Fixed- and adjustable-rate
Variable-rate
Total commercial business
Leasing and equipment finance
Inventory finance
Total loans and leases (4)
Total interest-earning assets
Other assets (5)
Total assets
liabilities and equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
Total non-interest bearing deposits
Interest-bearing deposits:
Checking
Savings
Money market
Subtotal
Certificates of deposit
Total interest-bearing deposits
Total deposits
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
Total interest-bearing liabilities
Total deposits and borrowings
Other liabilities
Total liabilities
Total TCF Financial Corp. stockholders’ equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
Net interest income and margin
bps = basis points.
(1) Tax-exempt income was not significant and thus yields on interest-earning assets and net interest margin have not been presented on a tax equivalent basis. Tax-exempt
income of $1,679,000 and $1,933,000 was recognized during the years ended December 31, 2008 and 2007, respectively.
(2) Average balance and yield of securities available for sale are based upon the historical amortized cost.
(3) Certain variable-rate loans have contractual interest rate floors.
(4) Average balance of loans and leases includes non-accrual loans and leases, and is presented net of unearned income.
(5) Includes operating leases.
22 : TCF Financial Corporation and Subsidiaries
The following table presents the components of the changes in net interest income by volume, rate and number of days.
(In thousands)
Interest income:
Investments and other
U.S. Government sponsored entities:
Mortgage-backed securities
Debentures
Other securities
Total securities
available for sale
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
Consumer – other
Commercial real estate:
Fixed- and adjustable-rate
Variable-rate
Commercial business:
Fixed- and adjustable-rate
Variable-rate
Leasing and equipment finance
Inventory finance
Total loans and leases
Total interest income
Interest expense:
Checking
Savings
Money market
Certificates of deposit
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
Total interest expense
Net interest income
Year ended
December 31, 2009
Versus Same Period in 2008
Increase (Decrease) Due to
Year Ended
December 31, 2008
Versus Same Period in 2007
Increase (Decrease) Due to
Volume(1)
Rate(1)
# Days
Total
Volume(1)
Rate (1) # Days
Total
$ 4,478
$ (6,038) $
(7)
$ (1,567) $
(957)
$ (1,356)
$ 13
$ (2,300)
(22,721)
8,487
17
(6,879)
–
(423)
(3,102)
(18,417)
–
–
–
–
(29,600)
8,487
(406)
5,753
–
(687)
(3,540)
–
(162)
(21,519)
5,066
(3,702)
(7,072)
9,091
(7,911)
(15,640)
(10,925)
1,747
(955)
(293)
(8)
(23,667)
(2,127)
(6,172)
18,925
19,372
(4,599)
(7,656)
(35,547)
(3,754)
27,528
(1,735)
(3,303)
(6,769)
(427)
(62)
23,798
(8,566)
21,496
(839)
(3,983)
(14,499)
(99)
(2,548)
38,870
14,794
66,698
73,704
(282)
(4,922)
(12,151)
(1)
(48,026)
(78,111)
(26)
(29)
–
–
(1,800)
(1,807)
(192)
26,643
1,049
(16,795)
(4,164)
(3,674)
(18,273)
24,450
47,130
(4,582)
(16,527)
(4,123)
(19,800)
(4,593)
2,027
7,869
(69,181)
(6,806)
(22)
(161)
(19)
(133)
–
(481)
(481)
(816)
(991)
(407)
(7,499)
26,719
14,793
16,872
(6,214)
(4,796)
9,955
(3,093)
(36,728)
(8,757)
(2,128)
(10,885)
(45,547)
39,333
(80)
(1,872)
25,875
4
78,282
82,391
(857)
10,082
248
518
6,019
25,677
31,696
30,007
45,796
(812)
(8,982)
(7,544)
–
(82,777)
(87,835)
(19,888)
(26,676)
(7,573)
(30,139)
(8,422)
2,918
(5,504)
(78,100)
(3,147)
–
–
1
1
954
298
27
361
85
27
50
–
–
1,802
1,816
35
139
28
232
24
511
535
969
847
2,213
–
(848)
1,365
12,223
(15,877)
(8,326)
17,874
(15,253)
(865)
(10,804)
18,331
4
(2,693)
(3,628)
(20,710)
(16,455)
(7,297)
(29,389)
(2,379)
29,106
26,727
(47,124)
43,496
(1) 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. Changes
due to volume and rate are calculated independently for each line item presented.
Net interest income was $633 million for 2009, up 6.6%
from $593.7 million in 2008. The increase in net interest
income in 2009 primarily reflects the growth in average
interest-earning assets, up $1.2 billion over 2008, partially
offset by a 4 basis point reduction in net interest margin.
The decrease in the net interest margin, from 3.91% in 2008
to 3.87% in 2009, is primarily due to declines in yields of
interest earning assets, resulting from lower market interest
rates, the effect of higher balances of non-accrual loans
and leases and restructured loans and investments in lower
yielding debentures as a result of excess liquidity, partially
offset by declines in rates on average deposits and an
improvement in deposit mix.
Net interest income was $593.7 million in 2008, up from
$550.2 million in 2007. The increase in net interest income
in 2008 primarily reflects the growth in average interest-
earning assets, up $1.2 billion over 2007, partially offset
by a 3 basis point reduction in net interest margin. The
decrease in the net interest margin, from 3.94% in 2007
to 3.91% in 2008, is primarily due to the average cost of
2009 Form 10-K : 23
interest-bearing liabilities not decreasing as much as yields
on interest earning assets as a result of deposit pricing strat-
egies and the issuance of trust preferred securities in 2008.
Provision for Credit losses TCF provided $258.5 million
for credit losses in 2009, compared with $192 million in
2008 and $57 million in 2007. The increase in provision from
2008 to 2009 was primarily due to increased net charge-
offs in the consumer real estate, commercial lending and
leasing and equipment finance portfolios. Higher consumer
real estate provisions also include portfolio reserve rate
increases due to higher expected charge-offs and reserves
for restructured consumer real estate loans.
Consumer real estate charge-off rates increased
throughout 2009. As a result, TCF increased consumer real
estate allowance levels. Higher consumer real estate net
charge-offs are primarily due to depressed residential real
estate market conditions and the high level of unemploy-
ment. The increase in provision from 2007 to 2008 was due
to higher consumer real estate net charge-offs, the result-
ing portfolio reserve rate increases and higher reserves for
certain commercial loans, primarily in Michigan, and equip-
ment finance loans and leases.
Net loan and lease charge-offs were $186.5 million, or
1.34% of average loans and leases, in 2009, compared
with $100.5 million, or .78% of average loans and leases, in
2008 and $34.6 million, or .30% of average loans and leases,
in 2007.
The provision for credit losses is calculated as part of
the determination of the allowance for loan and lease losses.
The determination of the allowance for loan and lease
losses and the related provision for credit losses is a critical
accounting estimate which involves a number of factors
such as historical trends in net charge-offs, delinquencies
in the loan and lease portfolio, year of loan origination,
value of collateral, general economic conditions and
management’s assessment of credit risk in the current loan
and lease portfolio. Also see “Consolidated Financial
Condition Analysis — Allowance for Loan and Lease Losses.”
Non-Interest Income Non-interest income is a signifi-
cant source of revenue for TCF, representing 45.4% of total
revenues in 2009, 45.6% in 2008 and 49.6% in 2007, and is an
important factor in TCF’s results of operations. Total fees and
other revenue was $496.5 million for 2009, compared with
$474.1 million in 2008 and $490.3 million in 2007.
The following table presents the components of non-interest income.
(Dollars in thousands)
Fees and service charges
Card revenue
ATM revenue
Subtotal
Leasing and equipment finance
Other
Fees and other revenue
Gains on securities, net
Gains on sales of branches and
real estate
Visa share redemption
Total non-interest income
Fees and other revenue
as a percentage of
total revenue
Year Ended December 31,
2009
$286,908
104,770
30,438
422,116
69,113
5,239
496,468
29,387
–
–
$525,855
2008
$270,739
103,082
32,645
406,466
55,488
12,107
474,061
16,066
–
8,308
$498,435
2007
$278,046
98,880
35,620
412,546
59,151
18,588
490,285
13,278
37,894
–
$541,457
2006
$270,166
92,084
37,760
400,010
53,004
32,262
485,276
–
4,188
–
$489,464
2005
$262,636
79,803
40,730
383,169
47,387
23,409
453,965
10,671
13,606
–
$478,242
Compound Annual
Growth Rate
1-Year
2009/2008
5-Year
2009/2004
6.0%
1.6
(6.8)
3.9
24.6
(56.7)
4.7
82.9
.8%
10.5
(6.6)
2.0
6.6
(31.7)
1.2
5.4
–
(100.0)
5.5
(100.0)
–
1.4
42.84%
43.41%
44.91%
47.25%
45.58%
Fees and Service Charges Fees and service charges
increased $16.2 million, or 6.0%, to $286.9 million for 2009,
compared with $270.7 million for 2008 primarily due to an
increased number of checking accounts and related fee
income. During 2008, fees and service charges decreased
$7.3 million, or 2.6%, to $270.7 million, compared with
$278 million for 2007, primarily due to lower activity in
deposit service fees.
24 : TCF Financial Corporation and Subsidiaries
Card Revenue During 2009, card revenue, primarily
interchange fees, totaled $104.8 million, up from $103.1
million in 2008 and $98.9 million in 2007. The increases in
card revenue in 2009 and 2008 were primarily attributable
to growth in active accounts and increases in customer
transactions in 2009, partially offset by lower average trans-
action amounts. The continued success of TCF’s debit card
program is highly dependent on the success and viability
of Visa and the continued use by customers and acceptance
by merchants of its cards.
ATM Revenue ATM revenue totaled $30.4 million for 2009,
down from $32.6 million in 2008 and $35.6 million in 2007.
The declines in ATM revenue were primarily attributable to
fewer fee generating transactions by TCF customers.
The following table sets forth information about TCF’s card business.
(Dollars in thousands)
Average number of checking accounts with a TCF card
Average active card users
Average number of transactions per card per month
Sales volume for the year ended:
Off-line (Signature)
On-line (PIN)
Total
Average transaction size (in dollars)
Percentage off-line
Average interchange rate
At or For the Year Ended December 31,
Percentage Increase (Decrease)
2009
1,533,234
843,825
20.7
$6,394,041
914,302
$7,308,343
$ 34
2008
1,449,501
812,385
20.3
$6,429,265
850,719
$7,279,984
$ 36
2007
1,455,540
811,961
19.4
$6,146,036
802,735
$6,948,771
$ 36
87.49%
1.34%
88.31%
1.34%
88.45%
1.35%
2009/2008
5.8%
3.9
2.0
(.5)
7.5
.4
(5.6) –
(.9)
–
2008/2007
(.4)%
.1
4.6
4.6
6.0
4.8
(.2)
(.7)
Leasing and Equipment Finance Revenue Leasing
and equipment finance revenues in 2009 increased $13.6
million, or 24.6%, from 2008. The increase in leasing and
equipment finance revenues for 2009 was primarily due to
higher sales-type lease revenue and increased operating
lease revenue as a result of the Fidelity National Capital,
Inc. acquisition at the end of the third quarter of 2009.
Leasing and equipment finance revenues decreased $3.7
million, or 6.2%, in 2008 compared with 2007. The decrease
in leasing and equipment finance revenues for 2008 was
primarily driven by a $1.9 million decrease in sales-type
lease revenues and a decrease of $2.1 million in operating
lease revenues. The decrease in operating lease revenues
was primarily the result of fewer operating lease transac-
tions being generated.
Sales-type lease revenues generally occur at or near
the end of the lease term as customers extend the lease or
purchase the underlying equipment. Leasing and equipment
finance revenues may fluctuate from period to period based
on customer-driven factors not within TCF’s control.
Other Non-Interest Income Total other non-interest
income in 2009 decreased $6.9 million from 2008 compared
with a decrease in 2008 of $6.5 million from 2007. These
decreases were primarily due to TCF no longer selling
investment and insurance products in the branches and a
decrease in gains on the sales of education loans in 2007
and 2008, partially offset by servicing fees generated by
TCF Inventory Finance.
The following table presents the components of other non-interest income.
(Dollars in thousands)
Gains on sales of education loans
Mortgage banking
Investments and insurance
Other
Total other earnings
N.M. Not Meaningful.
Year Ended December 31,
2009
$ 3
–
643
4,593
$5,239
2008
$ 1,456
–
9,405
1,246
$12,107
2007
$ 2,011
–
10,318
6,259
$18,588
2006
$ 7,224
4,734
10,695
9,609
$32,262
2005
$ 2,078
5,578
10,665
5,088
$23,409
Compound Annual
Growth Rate
2009/2008
2009/2004
(99.8)%
–
(93.2)
N.M.
(56.7)
(79.2)%
(100.0)
(44.8)
19.6
(31.7)
2009 Form 10-K : 25
Gains on Securities, Net In 2009, net gains of $29.4
million were recognized on sales of $2.1 billion in mortgage-
backed securities and agency debentures. In 2008, gains
of $16.1 million were recognized on sales of $1.5 billion in
mortgage-backed securities and $174.9 million in treasury
bills. In 2007, gains of $13.3 million were recognized on the
sales of $1.2 billion in mortgage-backed securities.
Gains on Sales of Branches and Real Estate There
were no gains on sales of branches and real estate in 2009
or 2008. Gains on sales of branches and real estate were
$37.9 million for 2007. During the first quarter of 2007, TCF
sold the deposits and facilities of 10 out-state branches in
Michigan and recognized a $31.2 million gain.
Non-Interest expense Non-interest expense increased $64.7 million, or 9.5%, in 2009, and $43.9 million, or 6.9%, in 2008,
excluding the Visa indemnification expense and operating lease depreciation. The following table presents the components of
non-interest expense.
(Dollars in thousands)
Compensation and employee benefits
Occupancy and equipment
Deposit account premiums
Foreclosed real estate and
repossessed assets, net
FDIC premiums and assessments
Advertising and marketing
Other
Subtotal
Operating lease depreciation
Visa indemnification expense
Total non-interest expense
N.M. Not Meaningful.
2009
$356,996
126,292
30,682
30,542
27,471
17,134
156,299
745,416
22,368
–
$767,784
Year Ended December 31,
2008
$341,203
127,953
16,888
18,731
2,990
19,150
153,796
680,711
17,458
(3,766)
$694,403
2007
$346,468
120,824
4,849
5,558
1,145
16,829
141,167
636,840
17,588
7,696
$662,124
2006
$341,857
114,618
5,047
4,068
1,139
21,879
146,242
634,850
14,347
–
$649,197
Compound Annual
Growth Rate
1-Year
2009/2008
4.6%
(1.3)
81.7
63.1
N.M.
(10.5)
1.6
9.5
28.1
N.M.
10.6
5-Year
2009/2004
2.0%
5.7
27.9
135.0
89.7
(.3)
3.7
5.3
64.7
–
5.8
2005
$326,526
103,900
5,822
2,466
1,080
19,869
139,937
599,600
7,335
–
$606,935
Compensation and Employee Benefits Compensation
and employee benefits represented 46.5%, 49.1% and
52.3% of total non-interest expense in 2009, 2008 and
2007, respectively. Compensation and employee benefits
increased $15.8 million, or 4.6%, in 2009, compared with
a decrease of $5.3 million, or 1.5%, in 2008. The increases
in compensation and benefits in 2009 were primarily due
to increases in leasing and equipment finance and the
inventory finance compensation costs as a result of
expansion and growth and increased employee medical
plan expenses. The decreases in compensation and benefits
in 2008 was primarily due to headcount reductions, decreased
performance-based compensation as no executive bonuses
were paid in 2008 and lower benefit related costs, partially
offset by expenses from branch expansion and the new
inventory finance business.
Occupancy and Equipment Occupancy and equipment
expenses decreased $1.7 million in 2009 and increased
$7.1 million in 2008. The decrease in 2009 was primarily
due to the closing of six branches. The increase in 2008 was
primarily due to costs associated with branch expansion
and increased real estate taxes.
Deposit Account Premiums Deposit account premium
expense increased $13.8 million to $30.7 million in 2009 and
increased $12 million to $16.9 million in 2008. The increases
in deposit account premium expenses were primarily due to
successful marketing campaigns commencing in June of 2008
which have resulted in increased checking account produc-
tion. New checking accounts grew 24.4% in 2009 compared
with 2008.
Foreclosed Real Estate and Repossessed Assets
Foreclosed real estate and repossessed assets expense
totaled $30.5 million in 2009, compared to $18.7 million
in 2008 and $5.6 million in 2007. The increase in 2009 was
primarily due to the increased number of foreclosed
consumer and commercial real estate properties and
property valuation write-downs.
26 : TCF Financial Corporation and Subsidiaries
FDIC Premiums and Assessments FDIC premiums and
assessments expense totaled $27.5 million in 2009, up $24.5
million from $3 million in 2008. The increase is primarily due
to higher insurance rates, deposit growth and the FDIC special
assessment of $8.4 million in the second quarter of 2009.
Other Non-Interest Expense Other non-interest
expense totaled $156.3 million in 2009, up $6.3 million from
2008, primarily due to an increase in premiums for credit
insurance on consumer real estate loans, partially offset by
a decrease in separation expense.
Operating Lease Depreciation Operating lease depre-
ciation totaled $22.4 million in 2009, up $4.9 million from
$17.5 million in 2008. The increase in 2009 was primarily
due to the acquisition of FNCI in September 2009.
Visa Indemnification Expense TCF is a member of
Visa U.S.A. for issuance and processing of its card trans-
actions. As a member of Visa, TCF has an obligation to
indemnify Visa U.S.A. under its bylaws and Visa under a
retrospective responsibility plan, for contingent losses
in connection with certain covered litigation (“the Visa
indemnification”) disclosed in Visa’s public filings with
the Securities and Exchange Commission (SEC) based on its
membership proportion. TCF is not a party to the lawsuits
brought against Visa U.S.A. TCF’s membership proportion
in Visa U.S.A. is .16234% at December 31, 2009.
As of December 31, 2009, TCF held 308,219 Visa Inc.
Class B shares with no recorded value that are generally
restricted from sale, other than to other Class B share-
holders, and are subject to dilution as a result of TCF’s
indemnification obligation.
At December 31, 2009, TCF’s estimated remaining Visa
contingent indemnification obligation was $3.1 million.
The remaining covered litigation against Visa is primarily
with card retailers and merchants, mostly related to fees
and interchange rates. TCF’s remaining indemnification
obligation for Visa’s covered litigation is a highly judgmen-
tal estimate. TCF must rely on disclosures made by Visa to
the public about the covered litigation in making estimates
of this contingent indemnification obligation.
Income Taxes Income tax expense represented 34.60% of
income before income tax expense during 2009, compared
with 37.30% and 28.38% in 2008 and 2007, respectively. The
lower effective income tax rate for 2009, as compared with
2008, is primarily due to a $4.2 million decrease in income
tax expense related to favorable developments in uncertain
tax positions in 2009, partially offset by an increase in the
annual effective income tax rate. Excluding these favorable
developments and the higher state taxes in 2008, the effec-
tive income tax rate was 37.76% for 2009, up from 34.24%
for 2008. The higher effective tax rate in 2008 compared
with 2007 was primarily due to a $4.3 million increase in
income tax expense and $2.8 million increase in deferred
income taxes related to changes in state income tax laws,
primarily in Minnesota. This compares with $18.4 million of
reductions in income tax expense comprised of favorable
settlements with the Internal Revenue Service of an isolated
tax deduction from a prior year, the effects of state tax law
changes, and other favorable developments involving uncer-
tain tax positions in 2007.
The determination of current and deferred income taxes
is a critical accounting estimate which is based on complex
analyses of many factors including interpretation of income
tax laws, the evaluation of uncertain tax positions,
differences between the tax and financial reporting bases
of assets and liabilities (temporary differences), estimates
of amounts due or owed such as the timing of reversal of
temporary differences and current financial accounting
standards. Additionally, there can be no assurance that
estimates and interpretations used in determining income
tax liabilities may not be challenged by taxing authorities.
Actual results could differ significantly from the estimates
and tax law interpretations used in determining the current
and deferred income tax liabilities.
In addition, under generally accepted accounting
principles, deferred income tax assets and liabilities are
recorded at the income tax rates expected to apply to
taxable income in the periods in which the deferred income
tax assets or liabilities are expected to be realized. If such
rates change, deferred income tax assets and liabilities
must be adjusted in the period of change through a charge
or credit to the Consolidated Statements of Income. Also, if
current period income tax rates change, the impact on the
annual effective income tax rate is applied year-to-date in
the period of enactment.
As discussed under “Item 1A. Risk Factors”, TCF uses a
REIT and related companies in the management of qualified
real estate secured assets. In the third quarter of 2009,
TCF received notice from a state taxing authority challeng-
ing the use of the REIT and related companies based on a
recent court decision unrelated to TCF and unrelated to
the laws in place for the tax years specified in the notice.
TCF has complied with the state income tax laws, intends to
vigorously defend its position, and believes the likelihood
of loss is remote.
2009 Form 10-K : 27
Consolidated Financial Condition Analysis
Securities available for Sale Securities available
for sale were $1.9 billion, or 10.7% of total assets, at
December 31, 2009. In 2009, TCF purchased $2.4 billion and
sold $2.1 billion of treasury and agency securities due to
opportunistic actions taken during volatile market condi-
tions. TCF’s securities available for sale portfolio primarily
includes fixed-rate mortgage-backed securities issued by
Fannie Mae and Freddie Mac. Net unrealized pre-tax gains
on securities available for sale totaled $2 million at
December 31, 2009, compared with $37.3 million at
December 31, 2008. TCF may, from time to time, sell
treasury and agency securities and utilize the proceeds
to reduce borrowings, fund growth in loans and leases
or for other corporate purposes.
TCF’s securities portfolio does not contain commercial
paper, asset-backed commercial paper or asset-backed
securities secured by credit cards or car loans. TCF also
does not participate in structured investment vehicles.
loans and leases The following tables set forth information about loans and leases held in TCF’s portfolio.
(Dollars in thousands)
At December 31,
Portfolio Distribution:
Consumer real estate and other:
Consumer real estate:
Closed-end loans
Lines of credit (1)
Total consumer real estate
Other
Total consumer real estate
and other
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance (2)
Inventory finance
Total loans and leases
2009
2008
2007
2006
2005
$ 5,560,110
1,720,459
7,280,569
51,422
$ 5,645,579
1,656,199
7,301,778
62,561
$ 5,621,048
1,429,633
7,050,681
223,691
$ 5,278,143
1,232,315
6,510,458
206,984
$ 4,529,388
1,389,741
5,919,129
287,407
7,331,991
3,269,003
449,516
3,718,519
3,071,429
468,805
$14,590,744
7,364,339
2,984,156
506,887
3,491,043
2,486,082
4,425
$13,345,889
7,274,372
2,557,330
558,325
3,115,655
2,104,343
–
$12,494,370
6,717,442
2,390,653
551,995
2,942,648
1,818,165
–
$11,478,255
6,206,536
2,297,500
435,203
2,732,703
1,503,794
–
$10,443,033
Compound Annual
Growth Rate
1-Year
2009/2008
5-Year
2009/2004
(1.5)%
3.9
(.3)
(17.8)
(.4)
9.5
(11.3)
6.5
23.5
N.M.
9.3
7.2%
3.2
6.2
(24.6)
5.5
8.7
.6
7.5
17.4
N.M.
8.8
(1) Excludes fixed-term amounts under lines of credit which are included in closed-end loans.
(2) Excludes operating leases included in other assets.
N.M. Not Meaningful.
(In thousands)
Geographic Distribution:
Minnesota
Illinois
Michigan
Wisconsin
Colorado
California
Florida
Texas
Ohio
New York
Arizona
Indiana
Other
Total
(1) Excludes operating leases included in other assets.
at December 31, 2009
Commercial
Real estate
and
Commercial
Business
$ 956,480
934,099
825,369
496,926
112,219
23,708
59,249
2,950
54,321
7,253
36,676
67,429
141,840
$3,718,519
leasing and
equipment
Finance(1)
$ 76,273
108,865
113,892
52,857
50,993
387,517
200,417
245,492
121,558
167,477
79,731
55,280
1,411,077
$3,071,429
Consumer
Real estate
and Other
$2,827,968
2,223,090
1,153,276
504,248
501,944
9,769
4,867
2,103
3,742
3,660
53,278
24,422
19,624
$7,331,991
Inventory
Finance
$ 9,512
22,608
18,676
19,487
4,835
12,969
24,363
21,960
25,701
26,209
5,398
15,246
261,841
$468,805
Total
$ 3,870,233
3,288,662
2,111,213
1,073,518
669,991
433,963
288,896
272,505
205,322
204,599
175,083
162,377
1,834,382
$14,590,744
28 : TCF Financial Corporation and Subsidiaries
Loans and leases outstanding at December 31, 2009 are shown by contractual maturity in the following table.
(In thousands)
Amounts due:
Within 1 year
After 1 year:
1 to 2 years
2 to 3 years
3 to 5 years
5 to 10 years
10 to 15 years
Over 15 years
Total after 1 year
Total
Amounts due after 1 year on:
Fixed-rate loans and leases
Variable- and adjustable-
rate loans (1)
Total after 1 year
at December 31, 2009(3)
Consumer
Real estate
and Other
Commercial
Real estate
Commercial
Business
leasing and
equipment
Finance(2)
Inventory
Finance
Total loans
and leases
$ 584,548
$ 573,747
$274,124
$1,156,061
$468,805
$ 3,057,285
347,674
421,414
722,873
1,610,465
1,319,184
2,325,833
6,747,443
$7,331,991
339,546
317,172
1,299,947
649,156
84,234
5,201
2,695,256
$3,269,003
57,142
54,023
44,880
17,426
1,921
–
175,392
$449,516
764,616
553,131
527,918
66,914
2,789
–
1,915,368
$3,071,429
–
–
–
–
–
–
–
$468,805
1,508,978
1,345,740
2,595,618
2,343,961
1,408,128
2,331,034
11,533,459
$14,590,744
$4,966,544
$1,511,655
$102,501
$1,915,368
$ –
$ 8,496,068
1,780,899
$6,747,443
1,183,601
$2,695,256
72,891
$175,392
–
$1,915,368
–
$ –
3,037,391
$11,533,459
(1) Excludes fixed-term amounts under lines of credit which are included in closed-end loans.
(2) Excludes operating leases included in other assets.
(3) This table does not include the effect of prepayments, which is an important consideration in management’s interest-rate risk analysis. Company experience indicates
that loans and leases remain outstanding for significantly shorter periods than their contractual terms.
Retail Lending TCF’s consumer real estate loan portfolio
represents approximately half of its total loan and lease
portfolio. The consumer real estate portfolio was flat in
2009 and increased 3.6% in 2008.
TCF’s consumer real estate portfolio is secured by
mortgages filed on residential real estate. At December 31,
2009, 68% of loan balances were secured by first mortgages.
The average loan size secured by a first mortgage was
$117 thousand and the average balance of loans secured by
a junior lien position was $36 thousand at December 31, 2009.
At December 31, 2009, 27% of the consumer real estate port-
folio carried a variable interest rate tied to the prime rate,
compared with 25% at December 31, 2008. At January 1, 2010,
$1.7 billion or 91% of variable-rate consumer real estate
loans were at their contractual interest rate floor, compared
with $1.8 billion or 98% at January 1, 2009.
At December 31, 2009, 76% of TCF’s consumer real estate
loans consisted of closed-end loans, compared with 77%
at December 31, 2008. TCF’s closed-end consumer real
estate loans require payments of principal and interest
over a fixed term. The average home value, which is based
on original values securing the loans and lines of credit in
this portfolio, was $250 thousand as of December 31, 2009.
TCF’s consumer real estate lines of credit require regular
payments of interest and do not require regular payments
of principal. The average FICO (Fair Isaac Company) credit
score at loan origination for the consumer real estate
portfolio was 725 as of December 31, 2009 and 723 as of
December 31, 2008.
TCF’s consumer real estate underwriting standards are
intended to produce adequately secured loans to customers
with good credit scores at the origination date. Loans with
loan-to-value (LTV) ratios in excess of 90% are only made
to creditworthy customers based on risk scoring models
and other credit underwriting criteria. TCF does not have
any subprime lending programs and does not originate 2/28
adjustable-rate mortgages (ARM) or Option ARM loans.
TCF also does not originate consumer real estate loans with
multiple payment options or loans with “teaser” interest
rates. Although TCF does not have any programs that target
subprime borrowers, in the normal course of lending to
customers, loans have been originated with FICO scores
below 620 at lower LTV ratios. Approximately 6% of the
consumer real estate portfolio, as of December 31, 2009,
2009 Form 10-K : 29
was originated at FICO scores below 620. TCF originated
$1.9 billion of new loans in 2008 and 2009; of these loans,
net charge-offs over the last eight quarters totaled
$4 million, or .10%.
At both December 31, 2009 and December 31, 2008,
total consumer real estate lines of credit outstanding were
$2.2 billion. Outstanding balances on consumer real estate
lines of credit were 58% of total lines of credit at December
31, 2009, compared with 55% at December 31, 2008.
Commercial Banking Commercial real estate loans
increased $284.8 million from December 31, 2008 to $3.3
billion at December 31, 2009. Variable- and adjustable-
rate loans represented 47% of commercial real estate loans
outstanding at December 31, 2009. Commercial business
loans decreased $57.4 million in 2009 to $449.5 million at
December 31, 2009. TCF continues to expand its commercial
lending activities generally to borrowers located in its
primary markets. With a focus on secured lending, approxi-
mately 99% of TCF’s commercial real estate and commercial
business loans were secured either by properties or other
business assets at December 31, 2009. At December 31,
2009, approximately 92% of TCF’s commercial real estate
loans outstanding were secured by properties located in
its primary markets. Included in TCF’s commercial real
estate loan portfolio as of December 31, 2009, are $32.1
million of loans to residential home builders. At December
31, 2009, the construction and development portfolio had
$13.1 million in loans over 30-days delinquent compared
with $223 thousand at December 31, 2008.
The following tables summarize TCF’s commercial real estate loan portfolio by property type.
(In thousands)
Retail services (1)
Apartments
Office buildings
Warehouse/industrial buildings
Hotels and motels
Health care facilities
Residential home builders
Other
Total
Permanent
$ 816,792
646,127
573,602
460,150
187,371
38,423
21,719
272,335
$3,016,519
(Dollars in thousands)
Retail services (1)
Apartments
Office buildings
Warehouse/industrial buildings
Hotels and motels
Health care facilities
Residential home builders
Other
Total
Balance
$ 840,701
672,442
625,658
468,522
241,463
38,423
32,145
349,649
$3,269,003
At December 31,
2009
Construction
and
Development
$ 23,909
26,315
52,056
8,372
54,092
–
10,426
77,314
$252,484
Total
$ 840,701
672,442
625,658
468,522
241,463
38,423
32,145
349,649
$3,269,003
2008
Construction
and
Development
$ 49,117
13,210
34,413
18,583
62,714
1,926
40,959
70,149
$291,071
Permanent
$ 792,312
572,545
443,509
405,284
148,502
24,390
36,495
270,048
$2,693,085
At December 31,
2009
Number
of loans
473
648
288
285
42
13
21
237
2,007
Over 30-Day
Delinquency
Rate as a
Percentage of
Balance
.31%
.05
.55
–
–
–
–
2.97
.62%
Balance
$ 841,429
585,755
477,922
423,867
211,216
26,316
77,454
340,197
$2,984,156
2008
Number
of Loans
532
597
260
282
49
12
75
223
2,030
Total
$ 841,429
585,755
477,922
423,867
211,216
26,316
77,454
340,197
$2,984,156
Over 30-Day
Delinquency
Rate as a
Percentage of
Balance
—%
.04
.53
—
—
.50
.43
.02
.11%
(1) Primarily retail shopping centers and stores, convenience stores, gas stations and restaurants.
30 : TCF Financial Corporation and Subsidiaries
Leasing and Equipment Finance The following tables summarize TCF’s leasing and equipment finance portfolio by
marketing segment and by equipment type, excluding operating leases.
(Dollars in thousands)
Marketing Segment
Middle market (1)
Small ticket (2)
Winthrop
Other
Total
At December 31,
2009
Over 30-Day
Delinquency as
a Percentage
of Balance
Percent
of Total
47.7%
26.6
18.8
6.9
100.0%
1.66%
2.56
.81
.03
1.62%
Balance
$1,487,749
525,686
328,553
144,094
$2,486,082
2008
Over 30-Day
Delinquency as
a Percentage
of Balance
Percent
of Total
59.8%
21.1
13.2
5.9
100.0%
1.45%
1.35
.08
.16
1.17%
Balance
$1,465,123
815,515
577,972
212,819
$3,071,429
(1) Middle market consists primarily of loan and lease financing of construction and manufacturing equipment and specialty vehicles.
(2) Small ticket includes loan and lease financings to small- and mid-size companies through programs with vendors, manufacturers, distributors, buying groups, and
franchise organizations.
(Dollars in thousands)
Equipment Type
Specialty vehicles
Manufacturing
Medical
Construction
Technology and data processing
Golf cart and turf
Furniture and fixtures
Printing
Exercise equipment
Other
Total
At December 31,
2009
Balance
$ 540,847
469,291
446,340
416,518
379,971
181,546
178,571
81,467
73,221
303,657
$3,071,429
Percent
of Total
17.6%
15.3
14.5
13.6
12.4
5.9
5.8
2.7
2.4
9.8
100.0%
Balance
$ 499,519
406,532
356,706
453,542
259,696
59,823
61,443
77,939
21,231
289,651
$2,486,082
2008
Percent
of Total
20.1%
16.4
14.3
18.2
10.4
2.4
2.5
3.1
.9
11.7
100.0%
The leasing and equipment finance portfolio increased
23.5% from December 31, 2008 to $3.1 billion at December
31, 2009, consisting of $868.9 million of loans and $2.2
billion of leases. Total loan and lease originations for
TCF Equipment Finance and Winthrop Resources were $1.2
billion for 2009, a decrease of 11.8% from $1.4 billion
in 2008. Total loan and lease purchases by TCF Equipment
Finance and Winthrop Resources increased to $563.9 million
for 2009, from $15 million for 2008. The backlog of approved
transactions was $322.6 million at December 31, 2009,
compared with $328 million at December 31, 2008. The
average size of transactions originated during 2009 was
$82.7 thousand, compared with $92.3 thousand during 2008.
TCF’s leasing activity is subject to risk of cyclical downturns
and other adverse economic developments. In an adverse
economic environment, there may be a decline in the
demand for some types of equipment, resulting in a decline
in the amount of new equipment being placed into service as
well as a decline in equipment values for equipment previously
placed in service. Declines in value of equipment under lease
increase the potential for impairment losses and credit losses
due to diminished collateral value, and may result in lower
2009 Form 10-K : 31
sales-type revenue at the end of the contractual lease term.
See Note 1 of Notes to Consolidated Financial Statements
— Policies Related to Critical Accounting Estimates for
information on lease accounting.
At December 31, 2009 and 2008, $254.9 million and
$56.3 million, respectively, of TCF’s lease portfolio were
discounted on a non-recourse basis with third-party
financial institutions and, consequently, TCF retains no
credit risk on such amounts. The leasing and equipment
finance portfolio tables above include lease residuals.
Lease residuals represent the estimated fair value of the
leased equipment at the expiration of the initial term of
the transaction and are reviewed on an ongoing basis. Any
downward revisions in estimated fair value are recorded
in the periods in which they become known. At December 31,
2009, lease residuals totaled $106.3 million, or 8.7% of
original equipment value, compared with $52.9 million, or
6.3% of original equipment value, at December 31, 2008.
TCF Inventory Finance The following table summarizes
the TCF Inventory Finance portfolio by marketing segment.
(Dollars in thousands)
at December 31, 2009
Equipment Type
Lawn and garden
Electronics and appliances
Total
Balance
$346,509
122,296
$468,805
Percent
of Total
73.9%
26.1
100.0%
In the third quarter of 2009, TCF formed a joint venture
with The Toro Company (“Toro”) called Red Iron Acceptance,
LLC (“Red Iron”). Red Iron provides U.S. distributors and
dealers and select Canadian distributors of the Toro and
Exmark brands with reliable, cost-effective sources of
financing. TCF and Toro will maintain a 55% and 45% own-
ership interest, respectively, in Red Iron. As TCF has
a controlling financial interest in Red Iron, its financial
results are consolidated in TCF’s financial statements.
Toro’s interest is reported as a non-controlling interest
within equity and qualifies as tier 1 regulatory capital.
In the fourth quarter of 2009, Red Iron purchased $90.8
million of inventory finance loans from Toro.
allowance for loan and lease losses The determina-
tion of the allowance for loan and lease losses is a critical
accounting estimate. TCF’s methodologies for determining
and allocating the allowance for loan and lease losses focus
on ongoing reviews of larger individual loans and leases,
historical net charge-offs, delinquencies in the loan and
lease portfolio, the level of impaired and non-performing
assets, values of underlying loan and lease collateral, the
overall risk characteristics of the portfolios, changes in
character or size of the portfolios, geographic location,
year of origination, prevailing economic conditions and
other relevant factors. The various factors used in the
methodologies are reviewed on a periodic basis.
The Company considers the allowance for loan and lease
losses of $244.5 million appropriate to cover losses incurred
in the loan and lease portfolios as of December 31, 2009.
However, no assurance can be given that TCF will not, in any
particular period, sustain loan and lease losses that are
sizable in relation to the amount reserved, or that subse-
quent evaluations of the loan and lease portfolio, in light
of factors then prevailing, including economic conditions,
TCF’s ongoing credit review process or regulatory require-
ments, will not require significant changes in the balance
of the allowance for loan and lease losses. Among other
factors, a continued economic slowdown, increasing levels
of unemployment and/or a decline in commercial or
residential real estate values in TCF’s markets may have an
adverse impact on the current adequacy of the allowance
for loan and lease losses by increasing credit risk and the
risk of potential loss.
The total allowance for loan and lease losses is gener-
ally available to absorb losses from any segment of the
portfolio. The allocation of TCF’s allowance for loan and
lease losses disclosed in the following table is subject to
change based on the changes in criteria used to evaluate
the allowance and is not necessarily indicative of the trend
of future losses in any particular portfolio.
The next several pages include detailed information
regarding TCF’s allowance for loan and lease losses, net
charge-offs, non-performing assets, past due loans and
32 : TCF Financial Corporation and Subsidiaries
leases and potential problem loans and leases. Included
in this data are numerous portfolio ratios that must be
carefully reviewed in relation to the nature of the underlying
loan and lease portfolios before appropriate conclusions
can be reached regarding TCF or for purposes of making
comparisons to other banks. Most of TCF’s non-performing
assets and past due loans are secured by real estate.
Given the nature of these assets and the related mortgage
foreclosure, property sale and, if applicable, mortgage
insurance claims processes, it can take 18 months or longer
for a loan to migrate from initial delinquency to final
disposition. This resolution process generally takes much
longer for loans secured by real estate than for unsecured
loans or loans secured by other property primarily due to
state real estate foreclosure laws.
The allocation of TCF’s allowance for loan and lease losses and credit loss reserves are as follows.
At December 31,
2009
2008
$164,966 $ 98,436
2,664
101,100
39,386
11,865
51,251
2,476
167,442
37,274
6,230
43,504
2007
$31,596
2,059
33,655
25,891
7,077
32,968
2006
$13,177
2,211
15,388
22,662
7,503
30,165
2005
$10,633
2,053
12,686
21,222
6,602
27,824
2009
2.27%
4.82
2.28
1.14
1.39
1.17
2008
1.38%
4.31
1.37
1.32
2.34
1.47
32,063
1,462
20,058
33
14,319
–
12,990
–
15,313
–
1.04
.31
.81
.75
Allocations as a Percentage of Total
Loans and Leases Outstanding by Type
At December 31,
2007
2006
2005
.45%
3.05
.46
1.01
1.27
1.06
.20%
3.54
.23
.95
1.36
1.03
.68
–
.66
.71
–
.52
.18%
3.57
.20
.92
1.52
1.02
1.02
–
.55
loan and lease losses
244,471
172,442
80,942
58,543
55,823
1.68
1.29
Other credit loss reserves:
Reserves netted against
portfolio asset balances 10,168
–
3,850
1,510
–
399
–
402
–
189
N.a.
N.A.
N.A.
N.A.
N.A.
N.a.
N.A.
N.A.
N.A.
N.A.
$258,489 $173,952
$81,341
$58,945
$56,012
1.77
1.30
.66
.52
.55
(Dollars in thousands)
Consumer real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Total commercial
Leasing and equipment
finance
Inventory finance
Total allowance for
Reserves for unfunded
commitments
Total credit loss
reserves
N.A. Not Applicable.
The increase in the consumer real estate allowance
from December 31, 2008 to December 31, 2009, is primarily
due to increased actual and estimated charge-offs due
to continued weakness in residential real estate market
conditions and higher levels of unemployment. The
commercial lending allowance is generally volatile due to
reserves for specific loans based on individual facts and
collateral values as loans migrate to potential problem
loans or to non-accrual. Charge-offs are taken against such
specific reserves. The commercial allowance decreased in
2009 from 2008 due to these factors. The increase in the
leasing and equipment finance allowance was primarily due
to higher charge-offs and the resulting portfolio reserve rate
increases, primarily the result of credit losses on construc-
tion, manufacturing and certain medical equipment.
The following table sets forth information detailing the allowance for loan and lease losses.
2009 Form 10-K : 33
(In thousands)
Balance at beginning of year
Charge-offs:
Consumer real estate
First mortgage lien
Junior lien
Total real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Leasing and equipment finance
Inventory finance
Total charge-offs
Recoveries:
Consumer real estate
First mortgage lien
Junior lien
Total consumer real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Leasing and equipment finance
Inventory finance
Total recoveries
Net charge-offs
Provision charged to operations
Balance at end of year
2009
$ 172,442
2008
$ 80,942
Year Ended December 31,
2007
$ 58,543
2006
$ 55,823
2005
$ 75,393
(55,420)
(53,137)
(108,557)
(18,498)
(127,055)
(35,956)
(9,810)
(29,372)
(205)
(202,398)
808
1,129
1,937
10,741
12,678
440
697
2,053
23
15,891
(186,507)
258,536
$ 244,471
(29,009)
(34,190)
(63,199)
(20,830)
(84,029)
(11,884)
(5,731)
(13,156)
–
(114,800)
202
633
835
11,525
12,360
30
130
1,735
–
14,255
(100,545)
192,045
$ 172,442
(9,589)
(12,197)
(21,786)
(19,455)
(41,241)
(2,409)
(1,264)
(7,507)
–
(52,421)
253
955
1,208
13,019
14,227
–
16
3,585
–
17,828
(34,593)
56,992
$ 80,942
(3,142)
(4,756)
(7,898)
(18,423)
(26,321)
(228)
(555)
(6,117)
–
(33,221)
108
173
281
13,621
13,902
39
86
1,225
–
15,252
(17,969)
20,689
$ 58,543
(2,363)
(2,951)
(5,314)
(18,675)
(23,989)
(74)
(454)
(23,387)
–
(47,904)
135
196
331
14,705
15,036
82
2,627
2,003
–
19,748
(28,156)
8,586
$ 55,823
The following table sets forth additional information regarding net charge-offs.
(Dollars in thousands)
Consumer real estate
First mortgage lien
Junior lien
Total consumer real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Total
N.M. Not Meaningful.
Year Ended December 31,
2009
2008
Net
Charge-offs
% of
average
loans and
leases
Net
Charge-offs
% of
Average
Loans and
Leases
$ 54,612
52,009
106,621
7,756
114,377
35,515
9,113
44,628
27,320
182
$186,507
1.11%
2.21
1.46
N.M.
1.56
1.13
1.92
1.24
.97
.10
1.34
$ 28,807
33,557
62,364
9,305
71,669
11,854
5,601
17,455
11,421
–
$100,545
.66%
1.39
.90
N.M.
.98
.44
1.05
.54
.50
–
.78
34 : TCF Financial Corporation and Subsidiaries
Non-Performing assets The increase in non-accrual
loans and leases from December 31, 2008 was primarily
due to increases in commercial and consumer real estate
non-accrual loans and leases. Consumer real estate
properties owned increased from December 31, 2008 due
to the addition of 707 new properties exceeding sales of
596 properties in 2009, as the average amount of time to
sell properties has increased from 4.2 months in 2008 to
4.6 months in 2009. The consumer real estate portfolio is
secured by a total of 88,609 properties of which 504, or
.57%, were in other real estate owned as of December 31,
2009. This compares with 306 other real estate owned
properties, or .34%, as of December 31, 2008. Consumer
real estate loans are charged-off to their estimated
realizable values upon entering non-accrual status.
Any necessary additional reserves are established for
Non-performing assets are summarized in the following table.
commercial, leasing and equipment finance and inventory
finance loans and leases when reported as non-accrual.
Other real estate owned is recorded at the lower of cost or
fair value less estimated costs to sell the property.
At the time of acquisition, certain purchased receivables
had experienced deterioration in credit quality since origi-
nation. For these receivables, it is probable that TCF will
not collect all contractual principal and interest payments.
These receivables were initially recorded at fair value and
a non-accretable discount was established for the differ-
ence between the contractual cash flows and the expected
cash flows determined at the time of acquisition. These
receivables are classified as accruing and interest income
continues to be recognized unless expected losses exceed
the non-accretable discount.
(Dollars in thousands)
Non-accrual loans and leases:
Consumer real estate
First mortgage lien
Junior lien
Total consumer real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Total non-accrual loans and leases
Other real estate owned:
Residential real estate
Commercial real estate
Total other real estate owned
Total non-performing assets
Non-performing assets as a percentage of:
Net loans and leases
Total assets
2009
2008
At December 31,
2007
2006
2005
$118,313
20,846
139,159
141
139,300
77,627
28,569
106,196
50,008
771
296,275
66,956
38,812
105,768
$402,043
$ 71,078
11,793
82,871
65
82,936
54,615
14,088
68,703
20,879
–
172,518
38,632
23,033
61,665
$234,183
$ 23,750
5,391
29,141
6
29,147
19,999
2,658
22,657
8,050
–
59,854
28,752
17,013
45,765
$105,619
$14,001
5,291
19,292
27
19,319
12,849
3,421
16,270
7,596
–
43,185
19,899
2,554
22,453
$65,638
$14,919
5,872
20,791
28
20,819
188
2,207
2,395
6,434
–
29,648
14,877
2,834
17,711
$47,359
2.80%
2.25
1.78%
1.40
.86%
.66
.58%
.45
.47%
.35
Non-performing assets secured by residential real estate
as a percentage of total non-performing assets
51.27
51.88
54.81
59.71
75.31
2009 Form 10-K : 35
The changes in amount of non-accrual loans and leases for the year ended December 31, 2009 is summarized in the
following table.
At or for the Year Ended December 31, 2009
Balance, beginning of period
Additions
Charge-offs
Transfers to real estate owned or
repossessed equipment
Return to accrual status
Payments
Other, net
Balance, end of period
Consumer
$ 82,936
223,785
(43,180)
(85,944)
(30,274)
(6,136)
(1,887)
$139,300
Commercial
$ 68,703
127,951
(41,663)
(28,151)
(3,304)
(15,754)
(1,586)
$106,196
leasing and
equipment
Finance
$ 20,879
97,260
(27,616)
(20,179)
(3,927)
(15,905)
(504)
$ 50,008
Inventory
Finance
$ –
2,515
(64)
–
–
(1,680)
–
$ 771
Total
$ 172,518
451,511
(112,523)
(134,274)
(37,505)
(39,475)
(3,977)
$ 296,275
Charge-offs and allowances recorded to date on the December 31, 2009 loan and lease portfolio and the remaining con-
tractual loan balance prior to non-accrual status is summarized in the following table.
(Dollars in thousands)
Consumer
Commercial
Leasing and equipment finance
Inventory finance
Total at December 31, 2009
Contractual loan
Balance Owed
by Customer
$170,818
131,384
50,008
771
$352,981
Charge-offs
and allowance
Recorded
$33,044
33,776
14,976
22
$81,818
Charge-offs and
allowance Recorded
as a Percentage
of Contractual
loan Balance
Owed by Customer
19.3%
25.7
29.9
2.9
23.2%
Remaining
Net loan
and lease
exposure
$137,774
97,608
35,032
749
$271,163
The changes in amount of other real estate owned for the year ended December 31, 2009 is summarized in the following table.
At or for the Year Ended December 31, 2009
Balance, beginning of period
Transferred from non-accrual status
Voluntarily surrendered
Sales of properties
Writedowns
Other, net
Balance, end of period
Residential
Real estate
$ 38,632
85,944
16,800
(66,901)
(9,731)
2,212
$ 66,956
Commercial
Real estate
$23,033
28,151
453
(9,616)
(3,485)
276
$38,812
Total
$ 61,665
114,095
17,253
(76,517)
(13,216)
2,488
$105,768
The summary of charge-offs and writedowns recorded to date on other real estate owned compared to the contractual loan
balances prior to non-performing status is summarized in the following table.
(Dollars in thousands)
Residential real estate
Commercial real estate
Total at December 31, 2009
Contractual
loan Balance
Prior to Non-
performing Status
$ 91,305
53,738
$145,043
Charge-offs
and writedowns
Recorded
$24,349
14,926
$39,275
Other
Real estate
Owned Balance
$ 66,956
38,812
$105,768
Charge-offs and
writedowns Recorded
as a Percentage
of Contractual
loan Balance
Prior to Non-
performing Status
26.7%
27.8
27.1%
36 : TCF Financial Corporation and Subsidiaries
Repossessed and Returned equipment At December 31,
2009 and December 31, 2008, TCF had $17.4 million and
$10.9 million, respectively, of repossessed and returned
equipment held for sale in its leasing and equipment
finance and inventory finance business. The overall
economic environment influences the level of repossessed
and returned equipment, the demand for these types of
used equipment in the marketplace and the fair value
or ultimate sales prices at disposition. TCF periodically
determines the fair value of this equipment and, if lower
than its recorded basis, makes adjustments.
Impaired loans Impaired loans include non-accrual commercial real estate and commercial business loans, equipment
finance loans, inventory finance loans and any restructured consumer real estate loans. The non-accrual impaired loans are
included in the previous disclosures of non-performing assets. Impaired loans are summarized in the following table.
(In thousands)
Non-accrual loans:
Consumer real estate
Commercial real estate
Commercial business
Leasing and equipment finance
Inventory finance
Subtotal
Accruing restructured consumer real estate loans
Total impaired loans
2009
$ 15,416
77,627
28,569
14,204
771
136,587
252,510
$389,097
At December 31,
2008
$ 9,216
54,615
14,088
5,552
–
83,471
27,423
$110,894
Change
$ 6,200
23,012
14,481
8,652
771
53,116
225,087
$278,203
Impaired loans totaled $389.1 million and $110.9 million at December 31, 2009, and December 31, 2008, respectively. The
increase in impaired loans from December 31, 2008 was primarily due to a $225.1 million increase in consumer real estate
accruing restructured loans resulting from TCF’s expanded consumer modification activity and an increase in commercial
real estate non-accrual loans. Included in impaired loans were $249.6 million and $25.3 million of accruing restructured
consumer real estate loans less than 90 days past due as of December 31, 2009 and 2008, respectively. The related allowance
for credit losses on impaired loans was $40.6 million at December 31, 2009, compared with $24.6 million at December 31,
2008. The average balance of impaired loans was $219.8 million for 2009 compared with $68.3 million for 2008.
Past Due loans and leases The following table sets forth information regarding TCF’s delinquent loan and lease
portfolio, excluding non-accrual loans and leases. Delinquent balances are determined based on the contractual terms
of the loan or lease.
(Dollars in thousands)
Excluding acquired portfolios: (1) (2)
60-89 days
90 days or more
Total
Including acquired portfolios: (1)
60-89 days
90 days or more
Total
(1) Excludes non-accrual loans and leases.
At December 31,
2009
Percentage
of loans
and leases
.36%
.33
.69%
.38%
.36
.74%
Principal
Balances
$ 50,567
44,700
$ 95,267
$ 54,073
52,056
$106,129
2008
Percentage
of Loans
and Leases
.32%
.28
.60%
.32%
.28
.60%
Principal
Balances
$41,851
37,619
$79,470
$41,851
37,619
$79,470
(2) Excludes delinquencies and non-accrual loans in acquired portfolios as delinquency and non-accrual migration in these portfolios is not expected to result in losses
exceeding the credit reserves netted against the loan balances.
The following table summarizes TCF’s over 60-day delinquent loan and lease portfolio by loan type, excluding non-accrual
loans and leases.
2009 Form 10-K : 37
(Dollars in thousands)
Consumer real estate
First mortgage lien
Junior lien
Total consumer real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Subtotal (1)
Delinquencies in acquired portfolios (2)
Total
At December 31,
2009
2008
Principal
Balances
Percentage
of Portfolio
Principal
Balances
Percentage
of Portfolio
$ 65,074
17,942
83,016
215
83,231
22
46
68
11,263
705
95,267
10,862
$106,129
1.34%
.78
1.16
.42
1.16
–
.01
–
.44
.19
.69
1.93
.74%
$53,482
13,940
67,422
313
67,735
225
605
830
10,905
–
79,470
–
$79,470
1.11%
.58
.93
.51
.93
.01
.12
.02
.44
–
.60
–
.60%
(1) Excludes delinquencies and non-accrual loans in acquired portfolios as delinquency and non-accrual migration in these portfolios is not expected to result in losses
exceeding the credit reserves netted against the loan balances.
(2) At December 31, 2009, includes $841.6 million of loans and leases.
loan Modifications TCF may modify certain loans to
retain customers or to maximize collection of loan balances.
TCF has maintained several programs designed to assist
consumer real estate customers by extending payment
dates or reducing customer’s contractual payments. All loan
modifications are made on a case by case basis. However,
under these programs, TCF typically reduces customer’s
contractual payments for a period of 12 to 18 months. Loan
modification programs for consumer real estate borrowers
implemented in the third quarter of 2009 have resulted in
a significant increase in restructured loans. Primarily these
loans are classified as troubled debt restructurings, referred
to as restructured loans and generally accrue interest
although at lower rates than the original loan.
A large number of modified loans were delinquent at the
time of modification and in most cases these loans were no
longer carried as delinquent following the modification. The
status of these loans at December 31, 2009 is based on the
modified loan terms.
At December 31, 2009, $252.5 million of loans were accruing
and were considered restructured loans, as the borrower
was experiencing financial difficulties and concessions were
granted that would not otherwise have been considered.
Reserves for losses on accruing consumer real estate
restructured loans were $27 million, or 10.7 percent of
the outstanding balance at December 31, 2009. The over
60-day delinquency rate on these restructured loans was
2.48 percent at December 31, 2009.
Potential Problem loans and leases In addition to
non-performing assets, there were $370.3 million of loans
and leases at December 31, 2009, for which management
has concerns regarding the ability of the borrowers to meet
existing repayment terms, compared with $185.5 million
at December 31, 2008. The increase in potential problem
loans and leases is primarily due to an increase in com-
mercial loans that were downgraded due to the borrower’s
exposure to declining home values. Potential problem
38 : TCF Financial Corporation and Subsidiaries
loans and leases are primarily classified as substandard for
regulatory purposes and reflect the distinct possibility, but
not the probability, that the Company will not be able to
collect all amounts due according to the contractual terms
of the loan or lease agreement. Although these loans and
leases have been identified as potential problem loans and
leases, they may never become delinquent, non-performing
or impaired. At December 31, 2009, approximately 98% of
these loans were less than 60 days past due. Additionally,
these loans and leases are generally secured by commercial
real estate or other assets, thus reducing the potential for
loss should they become non-performing. Potential problem
loans and leases are considered in the determination of the
adequacy of the allowance for loan and lease losses.
Potential problem loans and leases are summarized as follows.
(Dollars in thousands)
Commercial real estate
Commercial business
Leasing and equipment finance
Total
liquidity Management TCF manages its liquidity position
to ensure that the funding needs of depositors and borrowers
are met promptly and in a cost-effective manner. Asset
liquidity arises from the ability to convert assets to cash as
well as from the maturity of assets. Liability liquidity results
from the ability of TCF to maintain a diverse set of funding
sources to promptly meet funding requirements.
Deposits are the primary source of TCF’s funds for use in
lending and for other general business purposes. In addition
to deposits, TCF derives funds from loan and lease repay-
ments and borrowings. Deposit inflows and outflows are
significantly influenced by general interest rates, money
market conditions, competition for funds, customer service
and other factors. TCF’s deposit inflows and outflows have
been and will continue to be affected by these factors.
Borrowings may be used to compensate for reductions in
normal sources of funds, such as deposit inflows at less than
projected levels, net deposit outflows or to fund balance
sheet growth. Historically, TCF has borrowed primarily from
the FHLB, from institutional sources under repurchase
agreements and from other sources. At December 31, 2009,
TCF had $2.8 billion in unused secured borrowing capacity
under these funding sources. See “Management’s Discussion
and Analysis of Financial Condition and Results of Operations
– Consolidated Financial Condition Analysis – Borrowings.”
At December 31,
Principal
Balances
$288,848
42,464
38,998
$370,310
2009
Percentage
of Portfolio
8.84%
9.45
1.27
5.45
Principal
Balances
$137,332
27,127
20,994
$185,453
2008
Percentage
of Portfolio
4.60%
5.35
.84
3.10
Potential sources of liquidity for TCF include secured
borrowings from FHLB and the Federal Reserve Discount
Window or other unsecured and uncommitted short-term
lines, and issuance of debt and equity securities. TCF Bank’s
ability to pay dividends or make other capital distributions
to TCF is restricted by regulation and may require regula-
tory approval.
Deposits Deposits totaled $11.6 billion at December 31,
2009, up $1.3 billion from December 31, 2008. Checking,
savings and money market deposits are an important source
of low-cost funds and fee income for TCF. Checking, savings
and money market deposits totaled $10.4 billion, up $2.7
billion from December 31, 2008, and comprised 90% of total
deposits at December 31, 2009, compared with 75% of total
deposits at December 31, 2008. The average balance of these
deposits for 2009 was $9.5 billion, an increase of $2 billion
over the $7.5 billion average balance for 2008. Certificates of
deposit totaled $1.2 billion at December 31, 2009, down $1.4
billion from December 31, 2008. TCF had no brokered deposits
at December 31, 2009 or 2008. Non-interest bearing deposits
represented 21% and 22% of total deposits as of December
31, 2009 and 2008, respectively. TCF’s weighted-average
cost for deposits, including non-interest bearing deposits,
was .65% at December 31, 2009, compared with 1.61% at
2009 Form 10-K : 39
December 31, 2008. The decrease in the weighted average
rate for deposits was due to pricing decisions made by man-
agement as a result of declining interest rates during 2009.
Borrowings Borrowings totaled $4.8 billion at December
31, 2009, up $94.7 million from December 31, 2008.
See Notes 10 and 11 of Notes to Consolidated Financial
Statements for detailed information on TCF’s borrowings.
The weighted-average rate on borrowings was 4.42% at
December 31, 2009, and 4.48% at December 31, 2008.
TCF does not utilize unconsolidated subsidiaries or special
purpose entities to provide off-balance sheet borrowings.
Contractual Obligations and Commitments As disclosed in the Notes to Consolidated Financial Statements, TCF has
certain obligations and commitments to make future payments under contracts. At December 31, 2009, the aggregate
contractual obligations (excluding bank deposits) and commitments are as follows.
(In thousands)
Contractual Obligations
Total borrowings (1)
Annual rental commitments under
non-cancelable operating leases
Campus marketing agreements
Visa indemnification expense (2)
(In thousands)
Commitments
Commitments to lend:
Consumer real estate and other
Commercial
Leasing and equipment finance
Total commitments to lend
Standby letters of credit and guarantees
on industrial revenue bonds
Payments Due by Period
less than
1 Year
$453,399
27,212
2,985
3,051
$486,647
1-3
Years
$413,388
47,150
5,454
–
$465,992
3-5
Years
$1,003,177
after 5
Years
$2,885,535
41,416
5,157
–
$1,049,750
115,554
31,476
–
$3,032,565
amount of Commitment – expiration by Period
3-5
less than
Years
1 Year
1-3
Years
after 5
Years
$ 10,707
218,271
124,898
353,876
26,455
$380,331
$150,682
76,243
–
226,925
$ 135,617
34,134
–
169,751
$1,299,700
7,780
–
1,307,480
12,811
$239,736
15
$ 169,766
–
$1,307,480
Total
$4,755,499
231,332
45,072
3,051
$5,034,954
Total
$1,596,706
336,428
124,898
2,058,032
39,281
$2,097,313
(1) Total borrowings excludes interest.
(2) The payment time is estimated to be less than one year; however, the exact date of the payment can not be determined.
Commitments to lend are agreements to lend to a
customer provided there is no violation of any condition
in the contract. These commitments generally have fixed
expiration dates or other termination clauses and may
require payment of a fee. Since certain of the commitments
are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future
cash requirements. Collateral predominantly consists of
residential and commercial real estate.
Campus marketing agreements consist of fixed or mini-
mum obligations for exclusive marketing and naming rights
with eight campuses. TCF is obligated to make various
annual payments for these rights in the form of royalties
and scholarships through 2029. TCF also has various renewal
options, which may extend the terms of these agreements.
Campus marketing agreements are an important element
of TCF’s campus banking strategy.
40 : TCF Financial Corporation and Subsidiaries
See Note 17 of Notes to Consolidated Financial Statements
for information on standby letters of credit and guarantees
on industrial revenue bonds.
Stockholders’ equity Stockholders’ equity at December
31, 2009 was $1.2 billion, or 6.57% of total assets, down
from $1.5 billion, or 8.92% of total assets, at December 31,
2008. The decrease in stockholders’ equity was primarily
due to the repayment of $361.2 million in preferred stock,
the payment of $50.8 million in dividends on common stock
and $5.7 million of dividends on preferred stock, partially
offset by a net income of $87.1 million. Dividends to com-
mon shareholders on a per share basis totaled 40 cents in
2009, a decrease of 60% from $1 in 2008. TCF’s dividend
payout ratio was 74% in 2009. The Company’s primary
funding sources for dividends are earnings and dividends
received from TCF Bank.
At December 31, 2009, TCF had 5.4 million shares
remaining in its stock repurchase program authorized by
its Board of Directors.
For the year ended December 31, 2009, average total
equity to average assets was 7.20%, compared with 7.04%
for the year ended December 31, 2008. For the year ended
December 31, 2009, tangible realized common equity to
tangible assets was 5.86%, compared with 6.01% for the
year ended December 31, 2008. Tangible realized common
equity represents common equity less goodwill, other
intangible assets, accumulated other comprehensive
income and non-controlling interest in subsidiaries.
Tangible realized common equity was $1 billion at
December 31, 2009, compared with $996.4 million at
December 31, 2008. Tangible assets represent common
equity less goodwill and other intangible assets. Tangible
assets were $17.7 billion at December 31, 2009, compared
with $16.6 billion at December 31, 2008. At December 31,
2009, TCF Financial and TCF Bank exceeded their regulatory
capital requirements and are considered “well-capitalized”
under guidelines established by the Federal Reserve Board
and the Office of the Comptroller of the Currency. See Notes
13 and 14 of Notes to Consolidated Financial Statements.
One factor considered in TCF’s capital planning process
is the amount of dividends paid to common stockholders
as a component of common capital generated.
TCF’s common capital generated for the year ended
December 31, 2009 is as follows.
(Dollars in thousands)
Net income
Add: Net loss attributable to the
non-controlling interest
Preferred stock dividends
Net income available to common stockholders
Treasury shares sold to TCF employee benefit plans
Amortization of stock compensation
Other
Subtotal
Total common capital generated
Common dividend as a percentage of
total common capital generated
2009
$ 86,687
410
(18,403)
68,694
19,147
8,615
(100)
27,662
$ 96,356
52.75%
Summary of Critical Accounting Estimates
Critical accounting estimates occur in certain accounting
policies and procedures and are particularly susceptible to
significant change. Policies that contain critical account-
ing estimates include the determination of the allowance
for loan and lease losses, lease financing and income taxes.
See Note 1 of Notes to Consolidated Financial Statements
for further discussion of critical accounting estimates.
Recent Accounting Developments
On June 12, 2009, the FASB issued Financial Accounting
Standards Codification 860-10-65, Accounting for
Transfers of Financial Assets, which removes the concept
of a qualifying special-purpose entity from GAAP, changes
the requirements for derecognizing financial assets,
and requires additional disclosures about a transferor’s
continuing involvement in transferred financial assets.
This Statement is effective for interim and annual report-
ing periods beginning after November 15, 2009. The initial
adoption of this statement will not impact TCF’s consoli-
dated financial statements. TCF has not used any special
purpose entities to derecognize financial assets.
On June 12, 2009, the FASB issued Financial Accounting
Standards Codification 810-10-65, Amendments to FASB
Interpretation No. 46(R), which eliminates exceptions to
consolidating qualifying special purpose entities, contains
new criteria for determining the primary beneficiary, and
increases the frequency of required reassessments to
determine whether a company is the primary beneficiary
of a variable interest entity. This Statement clarifies, but
does not significantly change, the characteristics that
identify a variable interest entity. This Statement also
contains a new requirement that any term, transaction,
or arrangement that does not have a substantive effect on
an entity’s status as a variable interest entity, a company’s
power over a variable interest entity, or a company’s
obligation to absorb losses or its right to receive benefits
of a variable interest entity must be disregarded in applying
the provisions of Interpretation 46(R). This Statement is
effective for interim and annual reporting periods beginning
after November 15, 2009. The adoption of this Statement will
not impact TCF’s consolidated financial statements.
Fourth Quarter Summary
In the fourth quarter of 2009, TCF reported net income of
$19.5 million, compared with $27.7 million in the fourth
quarter of 2008. Diluted earnings per common share was
15 cents for the fourth quarter of 2009, compared with
20 cents for the same 2008 period.
Net interest income was $169.6 million for the quarter
ended December 31, 2009, up $22.5 million, or 15.3%, from
the quarter ended December 31, 2008. The increase in net
interest income was primarily due to the growth in aver-
age interest-earning assets, up $1.3 billion over the fourth
quarter of 2008. The net interest margin was 4.07% and
3.84% for the fourth quarter of 2009 and 2008, respectively.
TCF provided $77.4 million for credit losses in the fourth
quarter of 2009, compared with $47.1 million in the fourth
quarter of 2008, primarily due to higher consumer real
estate and commercial real estate net charge-offs and the
resulting portfolio reserve rate increases. For the fourth
quarter of 2009, net loan and lease charge-offs were $48.7
million, or 1.35% of average loans and leases outstanding,
compared with $33.6 million, or 1.02% of average loans and
leases outstanding during the same 2008 period primarily
due to higher consumer real estate and commercial real
estate loan net charge-offs.
Total non-interest income in the fourth quarter of 2009
was $143.1 million, compared with $125 million in the fourth
quarter of 2008. The increase in non-interest income was
primarily due to an increase in leasing and fees and service
charges. Fees and service charges were $74.9 million, up
2009 Form 10-K : 41
11% from the fourth quarter of 2008, primarily due to an
increased number of checking accounts and related fee
income. Card revenues totaled $26.8 million for the fourth
quarter of 2009, up 6.2% over the same 2008 period. Leasing
and equipment finance revenues were $24.4 million for the
fourth quarter of 2009, up $8.1 million from the fourth
quarter of 2008 primarily due to an increase in sales-type
lease revenues and increased operating lease revenue
as a result of the FNCI acquisition by Winthrop Resources
Corporation at the end of the third quarter of 2009.
Non-interest expense totaled $206.8 million for the 2009
fourth quarter, an increase of $27 million, or 15%, from
$179.8 million for the 2008 fourth quarter. Compensation
and employee benefits increased $6.1 million, or 7.3%,
from the fourth quarter of 2008, primarily due to increases
in leasing and equipment finance and inventory finance
compensation costs as a result of expansion and growth.
Occupancy and equipment expenses decreased $1.4 million,
or 4.3%, from the fourth quarter of 2008, primarily due to
costs associated with branch expansion, relocation and
remodels. Deposit account premium expense increased
$3.7 million from the fourth quarter of 2008, due to new
marketing campaigns which resulted in increased checking
account production. Other expense in the fourth quarter of
2009 increased $3.7 million, or 8.9%, from the fourth quarter
of 2008 primarily due to an increase in credit insurance.
In the fourth quarter of 2009, the effective income tax
rate was 32.77% of income before tax expense, down from
38.75% for the fourth quarter of 2008. The lower effective
tax rate for the fourth quarter of 2009, compared with the
fourth quarter of 2008, was primarily due to a $1.1 million
year-to-date reduction due to a decrease in the estimated
tax rate, while the 2008 fourth quarter included a $1.5 mil-
lion increase in income tax expense related to distributions
from the Company’s deferred compensation plans.
Legislative, Legal and Regulatory Developments
Federal and state legislation imposes numerous legal and
regulatory requirements on financial institutions. Future
legislative or regulatory change, or changes in enforcement
practices or court rulings, may have a dramatic and potentially
adverse impact on TCF and its bank and other subsidiaries.
TCF has filed Chief Executive Officer and Chief Financial
Officer certifications as Exhibits 31.1 and 31.2 to its Form
42 : TCF Financial Corporation and Subsidiaries
10-K pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. TCF has also filed, as Exhibits 32.1 and 32.2 to Form
10-K, certificates called for under Section 906 of the Act.
Pursuant to Section 303A.12 of the New York Stock
Exchange (“NYSE”) Listed Company Manual, TCF’s Chief
Executive Officer submitted a certification to the NYSE
on May 15, 2009 indicating that he was not aware of
any violation by TCF of the NYSE’s Corporate Governance
listing standards.
Forward-Looking Information
This annual report on Form 10-K and other reports issued
by the Company, including reports filed with the SEC, may
contain “forward-looking” statements that deal with future
results, plans or performance. In addition, TCF’s management
may make such statements orally to the media, or to
securities analysts, investors or others. Forward-looking
statements deal with matters that do not relate strictly to
historical facts. TCF’s future results may differ materially
from historical performance and forward-looking statements
about TCF’s expected financial results or other plans and are
subject to a number of risks and uncertainties. These include,
but are not limited to the following:
adverse economic or Business Conditions, Credit
Risks Continued or deepening deterioration in general
economic and banking industry conditions, or continued
increases in unemployment in TCF’s primary banking markets;
adverse economic, business and competitive develop-
ments such as shrinking interest margins, deposit outflows,
deposit account attrition, or an inability to increase the
number of deposit accounts; adverse changes in credit
and other risks posed by TCF’s loan, lease, investment, and
securities available for sale portfolios, including continuing
declines in commercial or residential real estate values or
changes in the allowance for loan and lease losses dictated
by new market conditions or regulatory requirements;
interest rate risks resulting from fluctuations in prevailing
interest rates or other factors that result in a mismatch
between yields earned on TCF’s interest-earning assets and
the rates paid on its deposits and borrowings.
earnings/Capital Constraints, liquidity Risks
Limitations on TCF’s ability to pay dividends or to increase
dividends in the future because of financial performance
deterioration, regulatory restrictions or limitations;
increased deposit insurance premiums, special assessments
or other costs related to deteriorating conditions in the
banking industry and the economic impact on banks of the
Emergency Economic Stabilization Act, as amended (“EESA”);
the impact of financial regulatory reform proposals,
including possible additional capital requirements; adverse
changes in securities markets directly or indirectly affecting
TCF’s ability to sell assets or to fund its operations; dimin-
ished unsecured borrowing capacity resulting from TCF
credit rating downgrades and unfavorable conditions in the
credit markets that restrict or limit various funding sources.
legislative and Regulatory Requirements Consumer
protection and supervisory requirements which could
include the creation of a new consumer protection agency
and limits on Federal preemption for state laws that could
be applied to national banks; the imposition of require-
ments with an adverse impact relating to TCF’s lending,
loan collection and other business activities as a result of
the EESA, or other legislative or regulatory developments
such as mortgage foreclosure moratorium laws; reduction
of interchange revenue from debit card transactions; impact
of legislative, regulatory or other changes affecting customer
account charges and fee income; changes to bankruptcy
laws which would result in the loss of all or part of TCF’s
security interest due to collateral value declines (so-called
“cramdown” provisions); adverse regulatory examinations
and resulting enforcement actions, including those provided
for under the Bank Secrecy Act; heightened regulatory
practices, requirements or expectations, including, but not
limited to, requirements related to the Bank Secrecy Act
and anti-money laundering compliance activity.
Risks Relating to New Product Introduction TCF has
recently introduced a new anchor retail deposit account
product that replaces TCF Totally Free Checking, and that
calls for a monthly maintenance fee on accounts not meeting
certain specific requirements. TCF is also in the process of
implementing new regulatory requirements that prohibit
financial institutions from charging NSF fees on point-
of-sale and ATM transactions unless customers opt-in.
Customer acceptance of the new product changes cannot
be predicted with certainty, and these changes may have
an adverse impact on TCF’s ability to generate and retain
accounts and on its fee income revenue.
litigation Risks Results of litigation, including class
action litigation concerning TCF’s lending or deposit
activities or fees or charges, or employment practices,
and possible increases in indemnification obligations for
certain litigation against Visa U.S.A. (“covered litigation”)
and potential reductions in card revenues resulting from
covered litigation or other litigation against Visa.
Competitive Conditions; Supermarket Branching Risk
Reduced demand for financial services and loan and lease
products; adverse developments affecting TCF’s supermarket
banking relationships or any of the supermarket chains in
which TCF maintains supermarket branches.
accounting, audit, Tax and Insurance Matters
Changes in accounting standards or interpretations of
existing standards; monetary, fiscal or tax policies of the
federal or state governments, including adoption of state
legislation that would increase state taxes; adverse state
or Federal tax assessments or findings in tax audits; lack
of or inadequate insurance coverage for claims against TCF.
Technological and Operational Matters Technological,
computer related or operational difficulties or loss or theft
of information and the possibility that deposit account losses
(fraudulent checks, etc.) may increase.
Item 7A. Quantitative and
Qualitative Disclosures About
Market Risk
TCF’s results of operations are dependent to a large degree
on its net interest income and its ability to manage interest-
rate risk. Although TCF manages other risks, such as credit
risk, liquidity risk, operational and other risks, in the
normal course of its business, the Company considers
interest-rate risk to be one of its most significant market
risks. See “Item 1A. Risk Factors – Market Risk Management”
for further discussion. Since TCF does not hold a trading
portfolio, the Company is not exposed to market risk from
trading activities. A mismatch between maturities, interest
rate sensitivities and prepayment characteristics of assets
and liabilities results in interest-rate risk. TCF, like most
financial institutions, has material interest-rate risk
exposure to changes in both short-term and long-term
interest rates as well as variable interest rate indices (e.g.,
the prime rate).
2009 Form 10-K : 43
TCF’s Asset/Liability Management Committee (ALCO)
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.
TCF utilizes net interest income simulation models to
estimate the near-term effects (next twelve months) of
changing interest rates on its net interest income. Net
interest income simulation involves forecasting net interest
income under a variety of scenarios, including the level of
interest rates, the shape of the yield curve, and spreads
between market interest rates. The base net interest
income simulation performed as of December 31, 2009,
assumes interest rates are unchanged for the next twelve
months. The net interest income simulation shows that if
short-term and long-term interest rates were to sustain
an immediate increase of 100 basis points in the next
twelve months that net interest income would not signifi-
cantly change from the base case.
Management exercises its best judgment in making
assumptions regarding events that management can influ-
ence such as non-contractual deposit repricings and events
outside management’s control such as customer behavior
on loan and deposit activity, counterparty decisions on
callable borrowings and the effect that competition has
on both loan and deposit pricing. These assumptions are
inherently uncertain and, as a result, net interest income
simulation results will differ from actual results due the
timing, magnitude and frequency of interest rate changes,
changes in market conditions, customer behavior and
management strategies, among other factors.
In addition to the net interest income simulation
model, management utilizes an interest rate gap measure
(difference between interest-earning assets and interest-
bearing liabilities re-pricing within a given period). While
the interest rate gap measurement has some limitations,
including no assumptions regarding future asset or liability
production and a static interest rate assumption (large
quarterly changes may occur related to these items),
the interest rate gap represents the net asset or liability
sensitivity at a point in time. An interest rate gap measure
could be significantly affected by external factors such as
loan prepayments, early withdrawals of deposits, changes
44 : TCF Financial Corporation and Subsidiaries
in the correlation of various interest-bearing instruments,
competition, or a rise or decline in interest rates.
TCF’s one-year interest rate gap was a negative $1.2
billion, or 6.6% of total assets at December 31, 2009,
compared with a negative $631 million, or 3.8% of total
assets at December 31, 2008. A negative interest rate
gap position exists when the amount of interest-bearing
liabilities maturing or re-pricing exceeds the amount of
interest-earning assets maturing or re-pricing, including
assumed prepayments, within a particular time period.
TCF estimates that an immediate 25 basis point decrease
in current mortgage loan interest rates would increase
prepayments on the $7.2 billion of fixed-rate mortgage-
backed securities, residential real estate loans and
consumer loans at December 31, 2009, by approximately
$57 million, or 8.6%, in the first year. An increase in
prepayments would decrease the estimated life of the
portfolios and may adversely impact net interest income or
net interest margin in the future. Although prepayments on
fixed-rate portfolios are currently at a relatively low level,
TCF estimates that an immediate 100 basis point increase
in current mortgage loan interest rates would reduce
prepayments on the fixed-rate mortgage-backed securi-
ties, residential real estate loans and consumer loans at
December 31, 2009, by approximately $132 million, or
19.9%, in the first year. A slowing in prepayments would
increase the estimated life of the portfolios and may also
adversely impact net interest income or net interest margin
in the future. The level of prepayments that would actually
occur in any scenario will be impacted by factors other than
interest rates. Such factors include lenders’ willingness to
lend funds, which can be impacted by the value of assets
underlying loans and leases.
The following table summarizes TCF’s interest-rate gap position at December 31, 2009.
(Dollars in thousands)
Interest-earning assets:
Consumer loans (1)
Commercial loans (1)
Leasing and equipment finance (1)
Securities available for sale (1)
Investments
Inventory finance
Total
Interest-bearing liabilities:
Checking deposits (2)
Savings deposits (2)
Money market deposits (2)
Certificates of deposit
Short-term borrowings
Long-term borrowings (3)
Total
Interest-earning assets (under) over
interest-bearing liabilities
Cumulative gap
Cumulative gap as a percentage
of total assets:
At December 31, 2009
At December 31, 2008
within
30 Days
30 Days to
6 Months
Maturity/Rate Sensitivity
6 Months
to 1 Year
1 to 3 Years
$ 285,276
288,799
160,312
15,954
5
213,380
963,726
$ 468,511
432,976
615,871
73,236
132,632
149,811
1,873,037
$ 523,085
376,063
523,087
98,584
–
105,614
1,626,433
643,198
1,884,680
326,077
162,990
244,604
10,100
3,271,649
96,873
403,982
10,970
484,556
–
167,207
1,163,588
53,207
410,587
11,540
430,232
–
297,896
1,203,462
$2,578,443
1,075,530
1,288,164
356,779
–
–
5,298,916
801,271
1,506,255
253,043
97,932
–
715,262
3,373,763
3+ Years
Total
$3,476,676
1,545,151
483,995
1,365,923
31,055
–
6,902,800
2,805,741
1,134,451
38,939
11,795
–
3,320,430
7,311,356
$ 7,331,991
3,718,519
3,071,429
1,910,476
163,692
468,805
16,664,912
4,400,290
5,339,955
640,569
1,187,505
244,604
4,510,895
16,323,818
(2,307,923)
$(2,307,923)
709,449
$(1,598,474)
422,971
$(1,175,503)
1,925,153
$ 749,650
(408,556)
$ 341,094
341,094
$ 341,094
(12.9)%
(9.5)%
(8.9)%
(7.6)%
(6.6)%
(3.8)%
4.2%
16.3%
1.9%
3.4%
1.9%
3.4%
(1) Based upon contractual maturity, repricing date, if applicable, scheduled repayments of principal and projected prepayments of principal based upon experience and
third-party projections.
(2) Includes non-interest bearing deposits. At December 31, 2009, 18% of checking deposits, 51% of savings deposits, and 54% of money market deposits are included in
amounts repricing within one year. At December 31, 2008, 15% of checking deposits, 60% of savings deposits, and 56% of money market deposits are included in amounts
repricing within one year.
(3) Includes $2.5 billion of callable borrowings.
Item 8. Financial Statements and Supplementary Data
2009 Form 10-K : 45
Repo rt of I ndependent Registered
P ubli c accounting Firm
The Board of Directors and Stockholders
TCF Financial Corporation:
We have audited the accompanying consolidated statements
of financial condition of TCF Financial Corporation and
subsidiaries (the Company) as of December 31, 2009 and
2008, and the related consolidated statements of income,
equity, and cash flows for each of the years in the three-
year period ended December 31, 2009. These consolidated
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the account-
ing principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of TCF Financial Corporation and sub-
sidiaries as of December 31, 2009 and 2008, and the results
of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2009, in confor-
mity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United
States), TCF Financial Corporation’s internal control over
financial reporting as of December 31, 2009, based on criteria
established in Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 16, 2010
expressed an unqualified opinion on the effectiveness of
the Company’s internal control over financial reporting.
Minneapolis, Minnesota
February 16, 2010
46 : TCF Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
(Dollars in thousands, except per-share data)
assets
Cash and due from banks
Investments
Securities available for sale
Loans and leases:
Consumer real estate and other
Commercial real estate
Commercial business
Leasing and equipment finance
Inventory finance
Total loans and leases
Allowance for loan and lease losses
Net loans and leases
Premises and equipment
Goodwill
Other assets
Total assets
liabilities and equity
Deposits:
Checking
Savings
Money market
Certificates of deposit
Total deposits
Short-term borrowings
Long-term borrowings
Total borrowings
Accrued expenses and other liabilities
Total liabilities
Equity:
Preferred stock, par value $.01 per share, 30,000,000 shares authorized;
0 and 361,172 shares issued and outstanding
Common stock, par value $.01 per share, 280,000,000 shares authorized;
130,339,500 and 130,839,378 shares issued
Additional paid-in capital
Retained earnings, subject to certain restrictions
Accumulated other comprehensive loss
Treasury stock at cost, 1,136,688 and 3,413,855 shares, and other
Total TCF Financial Corporation stockholders’ equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
At December 31,
2009
2008
$ 299,127
163,692
1,910,476
7,331,991
3,269,003
449,516
3,071,429
468,805
14,590,744
(244,471)
14,346,273
447,930
152,599
565,078
$17,885,175
$ 4,400,290
5,339,955
640,569
1,187,505
11,568,319
244,604
4,510,895
4,755,499
381,602
16,705,420
$ 342,380
155,725
1,966,104
7,364,339
2,984,156
506,887
2,486,082
4,425
13,345,889
(172,442)
13,173,447
447,826
152,599
502,276
$16,740,357
$ 3,969,768
3,057,623
619,678
2,596,283
10,243,352
226,861
4,433,913
4,660,774
342,455
15,246,581
–
348,437
1,303
297,429
946,002
(18,545)
(50,827)
1,175,362
4,393 –
1,179,755
$17,885,175
1,308
330,474
927,893
(3,692)
(110,644)
1,493,776
1,493,776
$16,740,357
Consolidated Statements of Income
(In thousands, except per-share data)
Interest income:
Loans and leases
Securities available for sale
Investments and other
Total interest income
Interest expense:
Deposits
Borrowings
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Non-interest income:
Fees and service charges
Card revenue
ATM revenue
Subtotal
Leasing and equipment finance
Other
Fees and other revenue
Gains on securities, net
Gains on sales of branches and real estate
Visa share redemption
Total non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
Deposit account premiums
Advertising and marketing
Foreclosed real estate and repossessed assets, net
FDIC premiums and assessments
Other
Subtotal
Operating lease depreciation
Total non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Loss attributable to non-controlling interest
Net income
Preferred stock dividends
Non-cash deemed preferred stock dividend
Net income available to common stockholders
Net income per common share:
Basic
Diluted
Dividends declared per common share
See accompanying notes to consolidated financial statements.
2009 Form 10-K : 47
Year Ended December 31,
2009
2008
2007
$864,384
89,427
4,370
958,181
122,112
203,063
325,175
633,006
258,536
374,470
286,908
104,770
30,438
422,116
69,113
5,239
496,468
29,387
–
–
525,855
356,996
126,292
30,682
17,134
30,542
27,471
156,299
745,416
22,368
767,784
132,541
45,854
86,687
410
87,097
6,378
12,025
$ 68,694
$ .54
$ .54
$ .40
$847,512
110,946
5,937
964,395
156,774
213,948
370,722
593,673
192,045
401,628
270,739
103,082
32,645
406,466
55,488
12,107
474,061
16,066
–
8,308
498,435
341,203
127,953
16,888
19,150
18,731
2,990
150,030
676,945
17,458
694,403
205,660
76,702
128,958
–
128,958
2,540
–
$126,418
$ 1.01
$ 1.01
$ 1.00
$850,205
109,581
8,237
968,023
230,625
187,221
417,846
550,177
56,992
493,185
278,046
98,880
35,620
412,546
59,151
18,588
490,285
13,278
37,894
–
541,457
346,468
120,824
4,849
16,829
5,558
1,145
148,863
644,536
17,588
662,124
372,518
105,710
266,808
–
266,808
–
–
$266,808
$ 2.09
$ 2.09
$ .97
48 : TCF Financial Corporation and Subsidiaries
Consolidated Statements of Equity
Number of
Common
Shares
Issued
131,660,749
Preferred
Stock
$ –
Common
Stock
$1,317
Additional
Paid-in
Capital
Retained
Earnings
$ 343,744 $ 784,011
Non-
Stock Stockholders’ controlling
Interests
Equity
and Other
$ (34,926) $ (60,772) $ 1,033,374
Total
Equity
$ – $ 1,033,374
TCF Financial
Treasury Corporation
Accumulated
Other
Comprehensive
(Loss)/
Income
–
–
–
–
–
–
(140,775)
(51,275)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
(1)
–
–
–
–
–
–
–
266,808
–
266,808
(124,513)
–
16,871
16,871
–
–
–
–
–
266,808
16,871
283,679
(124,513)
–
(4,850)
(615)
(1,409)
7,430
(992)
4,534
–
–
569
–
–
–
–
–
–
–
–
–
–
–
(105,251)
4,850
–
(105,251)
–
(47)
–
–
2,208
–
(1,410)
7,430
1,216
4,534
–
131,468,699
–
$ –
–
$1,315
6,721
–
$ 354,563 $ 926,875
–
–
$ (18,055) $(165,686) $ 1,099,012
(6,721)
–
131,468,699
–
–
–
–
–
–
–
–
(223,647)
(405,674)
–
–
–
–
–
–
–
–
283
–
348,154
–
–
–
–
–
–
–
–
1,315
–
354,563
65
926,940
–
(18,055)
–
65
(165,686) 1,099,077
–
–
–
–
–
–
–
–
(3)
(4)
–
–
–
–
–
–
–
–
128,958
–
128,958
(2,540)
(126,447)
–
14,363
14,363
–
–
12,850
(19,573)
(7,530)
(4,217)
(6,474)
8,344
(173)
10,110
–
–
–
982
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,573
17,707
–
–
–
336
–
128,958
14,363
143,321
(2,257)
(126,447)
361,004
–
10,177
(3,238)
(6,478)
8,344
163
10,110
–
–
–
–
–
–
–
–
–
–
–
266,808
16,871
283,679
(124,513)
(105,251)
–
(47)
(1,410)
7,430
1,216
4,534
–
–
$ – $ 1,099,012
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65
1,099,077
128,958
14,363
143,321
(2,257)
(126,447)
361,004
–
10,177
(3,238)
(6,478)
8,344
163
10,110
–
130,839,378
–
$ 348,437
–
$1,308
(17,426)
–
$ 330,474 $ 927,893
–
–
17,426
$ (3,692) $(110,644) $ 1,493,776
–
–
$ – $ 1,493,776
(Dollars in thousands)
Balance as of December 31, 2006
Comprehensive income:
Net income
Other comprehensive income
Comprehensive income
Dividends on common stock
Repurchase of 3,910,000
common shares
Issuance of 198,850 common shares
Cancellation of common shares
Cancellation of common shares
for employee tax withholding
Amortization of stock compensation
Exercise of stock options, 87,083 shares
Stock compensation tax benefits
Change in shares held in trust for
deferred compensation plans, at cost
Balance as of December 31, 2007
Pension and postretirement
measurement date change
Subtotal
Comprehensive income:
Net income
Other comprehensive income
Comprehensive income
Dividends on preferred stock
Dividends on common stock
Issuance of preferred shares
and common warrant
Issuance of 755,838 common shares
Treasury shares sold to TCF employee
benefit plans, 683,787 shares
Cancellation of common shares
Cancellation of common shares
for employee tax withholding
Amortization of stock compensation
Exercise of stock options, 13,000 shares
Stock compensation tax benefits
Change in shares held in trust for
deferred compensation plans, at cost
Balance as of December 31, 2008
Comprehensive income (loss):
Income after income tax expense
Loss attributable to
non-controlling interest
Other comprehensive loss
Comprehensive income (loss)
–
–
–
Investment by non-controlling interest
Dividends on preferred stock
Dividends on common stock
Non-cash deemed
preferred stock dividend
Redemption of preferred stock
Issuance of 719,727 common shares
Treasury shares sold to TCF employee
benefit plans, 1,448,640 shares
Cancellation of common shares
Cancellation of common shares
for tax withholding
Amortization of stock compensation
Exercise of stock options, 108,800 shares
Stock compensation tax expense
Change in shares held in trust for
deferred compensation plans, at cost
–
Cost of issuance of common warrants
–
Balance as of December 31, 2009 130,339,500
(18,878)
–
–
–
–
(481,000)
86,687
–
86,687
–
–
–
–
–
–
–
–
–
–
–
–
710
–
12,025
(361,172)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(18,638)
–
(5)
(18,367)
(818)
–
–
–
–
(250)
8,615
(1,279)
(1,058)
86,687
–
410
–
87,097
–
(6,378)
(50,828)
(12,025)
–
–
–
243
–
–
–
–
–
(14,853)
(14,853)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,638
37,514
–
–
–
2,817
–
410
(14,853)
72,244
–
(5,668)
(50,828)
–
(361,172)
–
19,147
(580)
(250)
8,615
1,538
(1,058)
–
–
$ –
–
–
$1,303
(848)
(402)
–
–
$297,429 $ 946,002
–
–
–
(402)
$(18,545) $ (50,827) $1,175,362
848
–
(410)
–
(410)
4,803
–
–
–
–
–
–
–
–
–
–
–
–
(14,853)
71,834
4,803
(5,668)
(50,828)
–
(361,172)
–
19,147
(580)
(250)
8,615
1,538
(1,058)
–
–
–
(402)
$4,393 $1,179,755
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
2009 Form 10-K : 49
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Provision for credit losses
Net (decrease) increase in other assets and accrued
expenses and other liabilities
Gains on sales of assets and deposits, net
Other, net
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities:
Principal collected on loans and leases
Originations and purchases of loans
Purchases of equipment for lease financing
Purchase of leasing and equipment finance portfolios
Purchase of inventory finance portfolios
Proceeds from sales of securities available for sale
Proceeds from sales of loans
Proceeds from maturities of and principal collected
on securities available for sale
Purchases of securities available for sale
Net decrease in federal funds sold
Purchases of Federal Home Loan Bank stock
Proceeds from redemptions of Federal Home Loan Bank stock
Proceeds from sales of real estate owned
Purchases of premises and equipment
Proceeds from sales of premises and equipment
Net cash paid for Fidelity National Capital, Inc.
Other, net
Net cash used by investing activities
Cash flows from financing activities:
Net increase in deposits
Sales of deposits, net
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Payments on long-term borrowings
Purchases of common stock
Net change in non-controlling interest
Redemption of preferred stock
Proceeds from issuance of preferred stock and common warrant
Dividends paid on common stock
Dividends paid on preferred stock
Stock compensation tax (costs) benefits
Shares sold to TCF employee benefit plans
Other, net
Net cash provided by financing activities
Net (decrease) increase in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplemental disclosures of cash flow information:
Cash paid for:
Interest on deposits and borrowings
Income taxes
Transfer of loans and leases to other assets
See accompanying notes to consolidated financial statements.
Year Ended December 31,
2009
2008
2007
$ 87,097
$ 128,958
$ 266,808
69,632
258,536
(34,882)
(31,828)
15,321
276,779
363,876
3,380,198
(3,340,040)
(801,569)
(339,860)
(274,722)
2,293,739
937
327,856
(2,436,163)
–
(18,882)
11,129
25,913
(40,276)
1,428
(57,728)
22,717
(1,245,323)
1,324,967
–
17,743
31,393
(141,012)
–
4,803
(361,172)
–
(50,828)
(7,925)
(1,058)
19,147
2,136
838,194
(43,253)
342,380
$ 299,127
64,813
192,045
14,397
(16,679)
12,161
266,737
395,695
3,041,757
(3,494,969)
(850,459)
(15,001)
–
1,707,821
245,884
219,017
(1,888,527)
–
(144,611)
140,196
43,324
(49,556)
1,546
–
16,751
(1,026,827)
666,803
–
(329,209)
344,258
(323,348)
–
–
–
361,004
(126,447)
–
10,110
10,177
1,976
615,324
(15,808)
358,188
$ 342,380
64,169
56,992
28,292
(51,172)
6,751
105,032
371,840
3,341,219
(3,918,105)
(776,716)
–
–
1,916,424
187,967
234,215
(2,369,452)
71,000
(95,226)
53,008
33,635
(76,637)
9,743
–
14,653
(1,374,272)
48,707
(213,294)
341,957
1,275,329
(217,406)
(105,251)
–
–
–
(124,513)
–
4,534
–
718
1,010,781
8,349
349,839
$ 358,188
$ 329,609
$ 7,788
$ 135,682
$ 378,132
$ 42,957
$ 103,359
$ 408,248
$ 93,634
$ 73,733
50 : TCF Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant
Accounting Policies
Basis of Presentation The consolidated financial
statements include the accounts of TCF Financial Corporation
and its wholly owned subsidiaries. TCF Financial Corporation,
a Delaware corporation, is a financial holding company
engaged primarily in retail banking and wholesale banking
through its primary subsidiary, TCF Bank. TCF Bank owns
leasing and equipment finance, inventory finance and
REIT subsidiaries. These subsidiaries are consolidated with
TCF Bank and are included in the consolidated financial
statements of TCF Financial Corporation. All significant
intercompany accounts and transactions have been
eliminated in consolidation.
Certain reclassifications have been made to prior
years’ financial statements to conform to the current year
presentation. For Consolidated Statements of Cash Flows
purposes, cash and cash equivalents include cash and due
from banks.
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of rev-
enues and expenses during the reporting period. These esti-
mates are based on information available to management
at the time the estimates are made. Actual results could
differ from those estimates. Management has evaluated
subsequent events for disclosure or recognition up to the
time of filing these financial statements with the Securities
and Exchange Commission on February 16, 2010.
Policies Related to Critical Accounting Estimates
Summary of Critical accounting estimates Critical
accounting estimates occur in certain accounting policies
and procedures and are particularly susceptible to sig-
nificant change. Policies that contain critical accounting
estimates include the determination of the allowance for
loan and lease losses, lease financings and income taxes.
Critical accounting policies are discussed with and reviewed
by TCF’s Audit Committee.
Allowance for Loan and Lease Losses The allowance
for loan and lease losses is maintained at a level believed
by management to be appropriate to provide for probable
loan and lease losses incurred in the portfolio as of the bal-
ance sheet date, including known or anticipated problem
loans and leases, as well as for loans and leases which
are not currently known to require specific allowances.
Management’s judgment as to the amount of the allowance
is a result of ongoing review of larger individual loans and
leases, the overall risk characteristics of the portfolios,
changes in the character or size of the portfolios, geographic
location and prevailing economic conditions. Additionally,
the level of impaired and non-performing assets, historical
net charge-off amounts, delinquencies in the loan and lease
portfolios, values of underlying loan and lease collateral and
other relevant factors are reviewed to determine the amount
of the allowance. Impaired loans include non-accrual and
restructured commercial real estate and commercial busi-
ness loans, equipment finance loans, inventory finance loans
and restructured consumer real estate loans. Loan impair-
ment is generally measured as the present value of the
expected future cash flows discounted at the loan’s initial
effective interest rate. The fair value of the collateral for
fully collateral-dependent loans may be used to determine
loan impairment. Most consumer real estate loans and all
leases are excluded from the definition of an impaired loan
and are evaluated on a pool basis.
Loans and leases are charged off to the extent they are
deemed to be uncollectible. The amount of the allowance
for loan and lease losses is highly dependent upon manage-
ment’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
recorded in the provision for credit losses in the periods
in which they become known.
Lease Financing TCF provides various types of lease
financing that are classified for accounting purposes as
direct financing, sales-type or operating leases. Leases
that transfer substantially all of the benefits and risks of
ownership to the lessee are classified as direct financing
or sales-type leases and are included in loans and leases.
Direct financing and sales-type leases are carried at the
combined present value of the future minimum lease pay-
ments and the lease residual values. The determination
of the lease classification requires various judgments and
estimates by management including the fair value of the
equipment at lease inception, useful life of the equipment
under lease, estimate of the lease residual value and col-
lectibility of minimum lease payments.
Sales-type leases generate dealer profit which is recog-
nized at lease inception by recording lease revenue net of
the lease cost. Lease revenue consists of the present value
of the future minimum lease payments. Lease cost consists
of the leased equipment’s book value, less the present
value of its residual. The revenues associated with other
types of leases are recognized over the term of the underly-
ing leases. Interest income on direct financing and sales-
type leases is recognized using methods which approximate
a level yield over the fixed, non-cancelable term of the
lease. TCF receives pro rata rent payments for the interim
period until the lease contract commences and the fixed,
non-cancelable, lease term begins. TCF recognizes these
interim payments in the month they are earned and records
the income in interest income on direct finance leases.
Management has policies and procedures in place for the
determination of lease classification and review of the
related judgments and estimates for all lease financings.
Some lease financings include a residual value com-
ponent, which represents the estimated fair value of the
leased equipment at the expiration of the initial term of
the transaction. The estimation of residual values involves
judgments regarding product and technology changes,
customer behavior, shifts in supply and demand and other
economic assumptions. TCF reviews residual assumptions
on the portfolio at least annually and downward adjust-
ments, if necessary, are charged to non-interest expense
in the periods in which they become known.
Leases which do not transfer substantially all benefits
and risks of ownership to the lessee are classified as oper-
ating leases. Operating leases represent a rental agreement
where ownership of the underlying equipment resides with
TCF. Such leased equipment and related initial direct costs
are included in other assets on the balance sheet and are
depreciated on a straight-line basis over the term of the
lease to its estimated salvage value. Depreciation expense
2009 Form 10-K : 51
is recorded as operating lease expense and included in
non-interest expense. Operating lease rental income is
recognized when it is due according to the provisions of
the lease and is reflected as a component of non-interest
income. An allowance for lease losses is not provided on
operating leases.
Income Taxes Income taxes are accounted for using the
asset and liability method. Under this method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets
and liabilities and their respective tax-basis carrying
amounts. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences
are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period in which the enactment
date occurs.
The determination of current and deferred income taxes
is a critical accounting estimate which is based on complex
analyses of many factors including interpretation of fed-
eral and state income tax laws, the evaluation of uncertain
tax positions, differences between the tax and financial
reporting bases of assets and liabilities (temporary dif-
ferences), estimates of amounts due or owed such as the
timing of reversal of temporary differences and current
financial accounting standards. Additionally, there can be
no assurance that estimates and interpretations used in
determining income tax liabilities will not be challenged by
federal and state taxing authorities. Actual results could
differ significantly from the estimates and tax law inter-
pretations used in determining the current and deferred
income tax liabilities.
In the preparation of income tax returns, tax positions are
taken based on interpretation of federal and state income
tax laws for which the outcome is uncertain. Management
periodically reviews and evaluates the status of uncertain
tax positions and makes estimates of amounts ultimately
due or owed. The benefits of tax positions are recorded in
income tax expense in the consolidated financial statements,
net of the estimates of ultimate amounts due or owed
including any applicable interest and penalties. Changes in
the estimated amounts due or owed may result from closing
of the statute of limitations on tax returns, new legislation,
clarification of existing legislation through government
pronouncements, the courts and through the examination
52 : TCF Financial Corporation and Subsidiaries
process. TCF’s policy is to report interest and penalties,
if any, related to unrecognized tax benefits in income tax
expense in the Consolidated Statements of Income.
Other Significant Accounting Policies
Investments Investments are carried at cost, adjusted for
amortization of premiums or accretion of discounts, using a
level yield method. TCF periodically evaluates investments
for “other than temporary” impairment with losses, if any,
recorded in non-interest income as a loss on securities.
Securities available for Sale Securities available for
sale are carried at fair value with the unrealized hold-
ing gains or losses, net of related deferred income taxes,
reported as accumulated other comprehensive income
(loss), a separate component of equity. The cost of securi-
ties sold is determined on a specific identification basis
and gains or losses on sales of securities available for sale
are recognized on trade dates. Declines in the value of
securities available for sale that are considered other than
temporary are recorded in non-interest income as a loss on
securities. TCF periodically evaluates securities available
for sale for “other than temporary” impairment. Discounts
and premiums on securities available for sale are amortized
using a level yield method over the life of the security.
loans and leases Loans and leases are reported at
historical cost including net direct fees and costs associ-
ated with originating and acquiring loans and leases.
The net direct fees and costs for sales-type leases are
offset against revenues recorded at the commencement
of sales-type leases. Discounts and premiums on loans
purchased, net direct fees and costs, unearned discounts
and finance charges, and unearned lease income are
amortized to interest income using methods which approxi-
mate a level yield over the estimated remaining lives of
the loans and leases. Net direct fees and costs on lines
of credit are amortized on a straight line basis over the
contractual life of the line of credit and adjusted for
payoffs. Net deferred fees and costs on consumer real
estate lines of credit are amortized to service fee income.
Loans and leases, including loans or leases that are
considered to be impaired, are reviewed regularly by
management and are generally placed on non-accrual
status when the collection of interest or principal is 90 days
or more past due (150 days or more past due or six pay-
ments are owed for consumer real estate loans), unless
the loan or lease is adequately secured and in the process
of collection. Consumer real estate loans are also placed
on non-accrual status if, upon notification of bankruptcy,
the loan is 60 days or more past due. If the loan is cur-
rent at notification of bankruptcy, the loan is placed on
non-accrual status at 90 days or when four payments are
owed, or after a partial charge-off. When a loan or lease is
placed on non-accrual status, uncollected interest accrued
in prior years is charged off against the allowance for loan
and lease losses and interest accrued in the current year
is reversed. For non-accrual leases that have been funded
on a non-recourse basis by third-party financial institu-
tions, the related liability is also placed on non-accrual
status. Interest payments received on loans and leases in
non-accrual status are generally applied to principal unless
the remaining principal balance has been determined to be
fully collectible.
Premises and equipment Premises and equipment,
including leasehold improvements, are carried at cost and
are depreciated or amortized on a straight-line basis over
estimated useful lives of owned assets and for leasehold
improvements over the estimated useful life of the related
asset or the lease term, whichever is shorter. Maintenance
and repairs are charged to expense as incurred. Rent
expense for leased land with facilities is recognized in
occupancy and equipment expense. Rent expense for leases
with free rent periods or scheduled rent increases is recog-
nized on a straight-line basis over the lease term.
Other Real estate Owned Other real estate owned is
recorded at the lower of cost or fair value less estimated
costs to sell the property at the date of transfer to other
real estate owned. The fair value of other real estate is
determined through independent third-party appraisals,
automated valuation methods or broker opinions. At the
time a loan is transferred to other real estate owned, any
carrying amount in excess of the fair value less estimated
costs to sell the property is charged off to the allowance for
loan and lease losses. Subsequently, if the fair value of an
asset, less the estimated costs to sell, declines to less than
the carrying amount of the asset, the deficiency is recognized
in the period in which it becomes known and is included
in other non-interest expense. Net operating expenses of
properties and recoveries on sales of other real estate owned
are recorded in foreclosed real estate and repossessed
assets, net. Other real estate owned at December 31, 2009
and 2008 was $105.8 million and $61.7 million, respectively.
Investments in affordable Housing limited
Partnerships Investments in affordable housing consist
of investments in limited partnerships that operate quali-
fied affordable housing projects or that invest in other
limited partnerships formed to operate affordable housing
projects. TCF generally utilizes the effective yield method
to account for these investments with the tax credits net
of the amortization of the investment reflected in the
Consolidated Statements of Income as a reduction of
income tax expense. However, depending on circumstances,
the equity or cost methods may be utilized. The amount of
the investment along with any unfunded equity contributions
which are unconditional and legally binding are recorded in
other assets. A liability for the unfunded equity contributions
is recorded in other liabilities. At December 31, 2009, TCF’s
investments in affordable housing limited partnerships
were $37 million, compared with $44.1 million at December
31, 2008, and were recorded in other assets.
Five of these investments in affordable housing limited
partnerships are considered variable interest entities.
These partnerships are not consolidated with TCF. As of
December 31, 2009 and 2008, the carrying amount of
these five investments was $36.2 million and $43.1 million,
respectively. The maximum exposure to loss on these five
investments was $36.2 million at December 31, 2009;
however, the general partner of these partnerships provides
various guarantees to TCF including guaranteed minimum
returns. These guarantees are backed by a BBB credit-rated
company and significantly limit any risk of loss. In addition
to the guarantees, the investments are supported by the
performance of the underlying real estate properties which
also mitigates the risk of loss.
Intangible assets Goodwill is tested for impairment
annually. Other intangibles are amortized over their esti-
mated useful life. The Company reviews the recoverability
of these assets at least annually or earlier whenever an
event occurs indicating that they may be impaired.
2009 Form 10-K : 53
Stock-Based Compensation The fair value of restricted
stock and stock options is determined on the date of grant
and amortized to compensation expense, with a corre-
sponding increase in additional paid-in capital, over the
longer of the service period or performance period, but in
no event beyond an employee’s retirement date. For perfor-
mance-based restricted stock, TCF estimates the degree
to which performance conditions will be met to determine
the number of shares that will vest and the related com-
pensation expense. Compensation expense is adjusted
in the period such estimates change. Non-forfeitable
dividends, if any, paid on shares of restricted stock are
recorded to retained earnings for shares that are expected
to vest and to compensation expense for shares that are
not expected to vest.
Income tax benefits related to stock compensation
in excess of grant date fair value less any proceeds on
exercise are recognized as an increase to additional paid-
in capital upon vesting or exercising and delivery of the
stock. Any income tax benefits that are less than grant
date fair value less any proceeds on exercise would be
recognized as a reduction of additional paid in capital
to the extent of previously recognized income tax benefits
and then as income tax expense for the remaining amount.
See Note 15 for additional information concerning stock-
based compensation.
Deposit account Overdrafts Deposit account overdrafts
are reported in consumer or commercial loans. Net losses
on uncollectible overdrafts are reported as net charge-offs
in the allowance for loan and lease losses within 60 days
from the date of overdraft. Uncollectible deposit fees are
reversed against fees and service charges and a related
reserve for uncollectible deposit fees is maintained in other
liabilities. Other deposit account losses are reported in
other non-interest expense.
Note 2. Cash and Due from Banks
At December 31, 2009, TCF was required by Federal Reserve
Board regulations to maintain reserves of $48.8 million in
cash on hand or at the Federal Reserve Bank.
54 : TCF Financial Corporation and Subsidiaries
Note 3. Investments
The carrying values of investments, which approximate their
fair values, consist of the following.
(In thousands)
Federal Home Loan Bank stock, at cost:
Des Moines
Chicago
Subtotal
Federal Reserve Bank stock, at cost
Other
Total investments
At December 31,
2008
2009
$128,016
4,617
132,633
22,972
8,087
$163,692
$120,263
4,617
124,880
22,706
8,139
$155,725
The investments in FHLB stock are required investments
related to TCF’s borrowings from these banks. FHLBs obtain
their funding primarily through issuance of consolidated
obligations of the Federal Home Loan Bank system. The
Note 4. Securities Available for Sale
Securities available for sale consist of the following.
U.S. Government does not guarantee these obligations,
and each of the 12 FHLBs are generally jointly and severally
liable for repayment of each other’s debt. Therefore, TCF’s
investments in these banks could be adversely impacted
by the financial operations of the FHLBs and actions by the
Federal Housing Finance Agency.
The carrying values and yields on investments at
December 31, 2009, by contractual maturity, are shown below.
(Dollars in thousands)
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
No stated maturity
Total
Carrying
Value
$ –
1,700
1,000
5,387
155,605
$163,692
Yield
–%
2.88
3.50
5.79
2.53
4.89
2009
2008
At December 31,
Gross
amortized Unrealized Unrealized
losses
Gains
Gross
Cost
Fair
Value
Gross
Amortized Unrealized Unrealized
Losses
Gains
Gross
Cost
Fair
Value
(Dollars in thousands)
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal
agencies
Other
Other securities
Total
$1,903,201
263
4,783
$1,908,247
$21,138
–
221
$21,359
$(19,130) $1,905,209
263
5,004
$(19,130) $1,910,476
–
–
$1,928,245
299
250
$1,928,794
5.17%
$37,310
–
–
$37,310
$ – $1,965,555
299
250
$ – $1,966,104
–
–
Weighted-average yield
4.54%
Gross gains of $31.8 million and $17.7 million were recognized on sales of securities during 2009 and 2008, respectively.
$1.8 billion of mortgage-backed securities were pledged as collateral to secure certain deposits and borrowings at December
31, 2009 and 2008 (see Notes 10 and 11 for additional information).
The amortized cost and fair value of securities available for sale at December 31, 2009, by contractual maturity, are shown below.
(In thousands)
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
No stated maturity
Total
at December 31, 2009
amortized
Cost
$ 54
261
475
1,902,924
4,533
$1,908,247
Fair Value
$ 54
263
498
1,904,906
4,755
$1,910,476
2009 Form 10-K : 55
The following table shows the securities available for sale portfolio’s gross unrealized losses and fair value, aggregated
by investment category and length of time that individual securities have been in a continuous unrealized loss position.
Unrealized losses on securities available for sale are due to changes in interest rates and not due to credit quality issues.
TCF has the ability and intent to hold these investments until a recovery of fair value. Accordingly, TCF has concluded that
no other-than-temporary impairment has occurred at December 31, 2009.
(In thousands)
U.S. Government sponsored entities:
Mortgage-backed securities
less than 12 months
Fair Value
Unrealized
losses
at December 31, 2009
12 months or more
Fair Value
Unrealized
losses
Total
Fair Value
Unrealized
losses
$1,082,197
$(19,130)
$ –
$ –
$1,082,197
$(19,130)
At December 31, 2008, TCF had no securities in an unrealized loss position within the available for sale portfolio.
Note 5. Loans and Leases
The following table sets forth information about loans and leases.
(Dollars in thousands)
Consumer real estate and other:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Other
Total consumer real estate and other
Commercial:
Commercial real estate:
Permanent
Construction and development
Total commercial real estate
Commercial business
Total commercial
Leasing and equipment finance: (1)
Equipment finance loans
Lease financings:
Direct financing leases
Sales-type leases
Lease residuals
Unearned income and deferred lease costs
Total lease financings
Total leasing and equipment finance
Inventory finance
Total loans and leases
At December 31,
2009
2008
Percentage
Change
$ 4,961,347
2,319,222
7,280,569
51,422
7,331,991
$ 4,881,662
2,420,116
7,301,778
62,561
7,364,339
3,016,518
252,485
3,269,003
449,516
3,718,519
2,693,085
291,071
2,984,156
506,887
3,491,043
868,830
789,869
2,305,945
24,714
106,391
(234,451)
2,202,599
3,071,429
468,805
$14,590,744
1,813,254
22,095
52,906
(192,042)
1,696,213
2,486,082
4,425
$13,345,889
1.6%
(4.2)
(.3)
(17.8)
(.4)
12.0
13.3
9.5
(11.3)
6.5
10.0
27.2
11.9
101.1
(22.1)
29.9
23.5
N.M.
9.3%
(1) Operating leases of $105.9 million and $58.8 million at December 31, 2009 and 2008, respectively, are included in Other Assets on the Consolidated Statements
of Financial Condition.
N.M. Not Meaningful.
56 : TCF Financial Corporation and Subsidiaries
The aggregate amount of loans to non-management
directors of TCF and their related interests was $7.5 million
and $8.5 million at December 31, 2009 and 2008, respec-
tively. During 2009, $804 thousand in new loans were made
and $156 thousand of loans were repaid. All loans to out-
side directors and their related interests were made in the
ordinary course of business on normal credit terms, includ-
ing interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated persons.
The aggregate amount of loans to executive officers of TCF
was $97 thousand and $57 thousand at December 31, 2009
and 2008, respectively. In the opinion of management,
the above mentioned loans to outside directors and their
related interests and executive officers do not represent
more than a normal risk of collection.
Future minimum lease payments receivable for direct
financing, sales-type leases and operating leases as of
December 31, 2009 are as follows.
(In thousands)
2010
2011
2012
2013
2014
Thereafter
Total
Total
$ 881,616
641,081
425,724
241,865
95,059
27,414
$2,312,759
Note 6. Allowance for Loan and Lease Losses
Following is a summary of the allowance for loan and lease losses and other credit loss reserves and selected statistics.
(Dollars in thousands)
Balance at beginning of year
Charge-offs
Recoveries
Net charge-offs
Provision for credit losses
Balance at end of year
Other credit loss reserves:
2009
$ 172,442
(202,398)
15,891
(186,507)
258,536
$ 244,471
Year Ended December 31,
2008
$ 80,942
(114,800)
14,255
(100,545)
192,045
$ 172,442
2007
$ 58,543
(52,421)
17,828
(34,593)
56,992
$ 80,942
Reserves netted against portfolio asset balances
Reserves for unfunded commitments
Total credit loss reserves
Net charge-offs as a percentage of average loans and leases
Allowance for loan and lease losses as a percentage of total loans and leases at year-end
10,168
3,850
$ 258,489
1.34%
1.68
–
1,510
$ 173,952
.78%
1.29
–
399
$ 81,341
.30%
.66
Information relating to impaired loans and non-accrual loans and leases is as follows.
(In thousands)
Impaired loans: (1)
Non-accrual loans which are impaired
Accruing restructured consumer real estate loans
Balance at year-end
Related allowance for loan losses, at year-end (2)
Average impaired loans
Interest income recognized on accruing restructured consumer real estate loans
Contractual interest on accruing restructured consumer real estate loans (3)
Total non-accrual loans and leases:
Balance at year-end
Interest income recognized on loans and leases in non-accrual status
Contractual interest on non-accrual loans and leases (3)
At or For the Year Ended December 31,
2007
2008
2009
$136,587
252,510
389,097
40,615
219,761
3,215
6,308
296,275
3,010
$ 31,368
$ 83,471
27,423
110,894
24,558
68,283
495
1,331
172,518
1,956
$ 17,953
$25,737
4,861
30,598
2,718
21,490
19
62
59,854
1,386
$ 8,114
(1) Impaired loans include non-accrual and restructured commercial real estate and commercial business loans, equipment finance loans, inventory finance loans and
restructured consumer real estate loans.
(2) There were no impaired loans at December 31, 2009, 2008 and 2007 which, if required, did not have a related allowance for loan losses.
(3) Represents interest which would have been recorded had the loans and leases performed in accordance with their original contractual terms.
2009 Form 10-K : 57
There were no material commitments to lend additional funds to customers whose loans or leases were classified
as non-accrual at December 31, 2009. At December 31, 2009, accruing loans and leases delinquent for 90 days or more were
$52.1 million, compared with $37.6 million at December 31, 2008.
Note 7. Premises and Equipment
Premises and equipment are summarized as follows.
(In thousands)
Land
Office buildings
Leasehold improvements
Furniture and equipment
Subtotal
Less accumulated depreciation
and amortization
Total
At December 31,
2008
2009
$140,656
$142,024
257,807
266,210
60,509
59,284
294,790
305,276
753,762
772,794
324,864
$447,930
305,936
$447,826
TCF leases certain premises and equipment under oper-
ating leases. Net lease expense including utilities and other
operating expenses was $35.3 million, $35.5 million and
$34 million in 2009, 2008 and 2007, respectively.
At December 31, 2009, the total minimum rental pay-
ments for operating leases were as follows.
(In thousands)
2010
2011
2012
2013
2014
Thereafter
Total
$ 27,212
24,645
22,507
21,245
20,171
115,520
$231,300
Note 8. Goodwill and Other Intangible Assets
Goodwill and intangible assets are summarized as follows.
(In thousands)
Amortizable intangible assets:
Other intangibles related to
wholesale banking segment
Unamortizable intangible assets:
Goodwill related to retail
banking segment
Goodwill related to wholesale
banking segment
Total
At December 31,
Gross
amount
2009
accumulated
amortization
Net
amount
Gross
Amount
2008
Accumulated
Amortization
Net
Amount
$ 1,450
$45
$ 1,405
$ –
$ –
$ –
$141,245
11,354
$152,599
$141,245
$141,245
11,354
$152,599
11,354
$152,599
$141,245
11,354
$152,599
Other intangibles of $1.5 million was recorded as a result
of the acquisition of Fidelity National Capital, Inc. in 2009.
Amortization expense for intangible assets is estimated
to be $172 thousand for 2010, $172 thousand for 2011,
$168 thousand for 2012, $156 thousand for 2013, and $156
thousand for 2014. There was no impairment of goodwill or
intangible assets for the years ended December 31, 2009,
2008, or 2007.
58 : TCF Financial Corporation and Subsidiaries
Note 9. Deposits
Deposits are summarized as follows.
(Dollars in thousands)
Checking:
Non-interest bearing
Interest bearing
Total checking
Savings
Money market
Total checking, savings,
and money market
Certificates of deposit
Total deposits
Rate at
Year-end
2009
amount
–% $ 2,382,007
2,018,283
4,400,290
5,339,955
640,569
.35
.16
.92
.71
10,380,814
.58
1.22
1,187,505
.65% $11,568,319
At December 31,
% of
Total
20.6%
17.4
38.0
46.2
5.5
89.7
10.3
100.0%
Rate at
Year-End
2008
Amount
–%
.73
.32
1.96
1.66
$ 2,206,528
1,763,240
3,969,768
3,057,623
619,678
1.09
3.15
1.61%
7,647,069
2,596,283
$10,243,352
% of
Total
21.5%
17.2
38.7
30.0
6.0
74.7
25.3
100.0%
Certificates of deposit had the following remaining maturities at December 31, 2009.
(In thousands)
Maturity
0-3 months
4-6 months
7-12 months
13-24 months
25-36 months
37-48 months
49-60 months
Over 60 months
Total
$100,000+
$148,510
86,635
90,181
16,812
2,030
510
1,318
140
$346,136
Other
$206,264
206,136
340,050
71,096
7,995
4,249
4,292
1,287
$841,369
Total
$ 354,774
292,771
430,231
87,908
10,025
4,759
5,610
1,427
$1,187,505
2009 Form 10-K : 59
Note 10. Short-term Borrowings
The following table sets forth selected information for short-term borrowings (borrowings with an original maturity of less
than one year) for each of the years in the three year period ended December 31, 2009.
(Dollars in thousands)
at December 31,
Federal funds purchased
Securities sold under
repurchase agreements
Federal Home Loan Bank advances
Line of credit
U.S. Treasury, tax and
loan borrowings
Total
Year ended December 31,
average daily balance
Federal funds purchased
Securities sold under
repurchase agreements
Federal Home Loan Bank advances
Line of credit
U.S. Treasury, tax and
loan borrowings
Total
Maximum month-end balance
Federal funds purchased
Securities sold under
repurchase agreements
Federal Home Loan Bank advances
Line of credit
U.S. Treasury, tax and
loan borrowings
N.A. Not Applicable.
2009
2008
2007
amount
Rate
Amount
Rate
Amount
Rate
$ 17,000
.11%
$200,000
.03%
$150,000
3.68%
24,485
200,000
–
3,119
$244,604
.20
.22
–
–
.20
24,980
–
–
1,881
$226,861
2.75
–
–
–
.33
43,297
100,000
9,500
253,273
$556,070
4.31
4.33
5.93
4.29
4.16
$ 45,795
.14%
$208,307
2.14%
$131,551
4.98%
20,934
15,959
–
2,540
$ 85,228
$228,000
24,994
200,000
–
3,119
.61
.22
–
.20
.27
N.a.
N.a.
N.a.
N.a.
N.a.
36,666
133,538
5,997
27,255
$411,763
$395,000
57,485
400,000
17,500
255,715
2.47
1.97
5.17
2.55
2.18
N.A.
N.A.
N.A.
N.A.
N.A.
36,768
17,575
8,276
36,123
$230,293
$354,000
84,051
100,000
31,000
253,273
4.73
4.48
7.29
4.68
4.94
N.A.
N.A.
N.A.
N.A.
N.A.
Securities underlying repurchase agreements are book
entry securities. During the borrowing period, book entry
securities were delivered by entry into the counterparties’
accounts through the Federal Reserve System. The dealers
may sell, loan or otherwise dispose of such securities to
other parties in the normal course of their operations,
but have agreed to resell to TCF identical or substantially
identical securities upon the maturities of the agreements.
At December 31, 2009, all of the securities sold under short-
term repurchase agreements provided for the repurchase of
identical securities and were collateralized by mortgage-
backed securities having a fair value of $24.5 million.
60 : TCF Financial Corporation and Subsidiaries
Note 11. Long-term Borrowings
Long-term borrowings consist of the following.
(Dollars in thousands)
Federal Home Loan Bank advances and securities
sold under repurchase agreements
Subtotal
Subordinated bank notes
Subtotal
Junior subordinated notes (trust preferred)
Discounted lease rentals
Subtotal
Other borrowings
Total long-term borrowings
At December 31,
2009
Year of
Maturity
2009
2010
2011
2015
2016
2017
2018
2014
2015
2016
2068
2009
2010
2011
2012
2013
2014
2015
2016
2009
amount
$ –
100,000
300,000
900,000
1,100,000
1,250,000
300,000
3,950,000
71,020
49,969
74,522
195,511
110,441
–
108,795
69,420
43,968
25,657
6,500
402
201
254,943
–
$4,510,895
weighted-
average
Rate
–%
6.02
4.64
4.18
4.49
4.60
3.51
4.43
1.91
5.37
5.63
4.21
11.20
–
5.42
5.55
5.62
5.72
5.84
5.89
5.91
5.53
–
4.65
Amount
$ 117,000
100,000
300,000
900,000
1,100,000
1,250,000
300,000
4,067,000
74,917
49,790
74,457
199,164
110,440
25,104
17,077
8,976
4,059
1,118
9
–
–
56,343
966
$4,433,913
2008
Weighted-
Average
Rate
5.26%
6.02
4.64
4.18
4.49
4.60
3.51
4.45
5.27
5.37
5.63
5.43
11.20
6.38
6.29
6.34
6.47
6.94
7.73
–
–
6.36
5.00
4.69
At December 31, 2009, TCF has pledged loans secured by
residential real estate, commercial real estate loans and
FHLB stock with an aggregate carrying value of $5.2 billion
as collateral for FHLB advances. TCF has $1.6 billion of FHLB
advances and $900 million of repurchase agreements which
contain one-time call provisions for various years from
2010 through 2011.
The probability that the advances and repurchase
agreements will be called by counterparties depends pri-
marily on the level of related interest rates during the call
period. If FHLB advances are called, replacement funding
will be available from the FHLB at the then-prevailing market
rate of interest for the term selected by TCF, subject to
standard terms and conditions.
The next call year and stated maturity year for the call-
able FHLB advances and repurchase agreements outstanding
at December 31, 2009 were as follows.
(Dollars in thousands)
Next
Call
$2,050,000
400,000
–
–
–
–
$2,450,000
Weighted-
Stated
Average
Rate
Maturity
4.58% $ 100,000
200,000
3.84
500,000
–
100,000
–
1,250,000
–
300,000
–
$2,450,000
4.46
Weighted-
Average
Rate
6.02%
4.85
4.15
4.82
4.60
3.51
4.46
Year
2010
2011
2015
2016
2017
2018
Total
The $71 million of subordinated notes due 2014 will
reprice quarterly at the three-month LIBOR rate plus 1.63%.
These subordinated notes may be redeemed by TCF Bank
at its discretion. The $50 million of subordinated notes due
2015 have a fixed-rate coupon of 5% through March 14, 2010,
and will reprice quarterly thereafter at the three-month
LIBOR rate plus 1.56%. These subordinated notes may
be redeemed by TCF Bank at par after March 14, 2010. The
$74.5 million of subordinated notes due 2016 have a fixed-
rate coupon of 5.5% until February 1, 2016. All of these
subordinated notes qualify as Tier 2 or supplementary capi-
tal for regulatory purposes, subject to certain limitations.
For certain equipment leases, TCF sells its minimum
lease rentals to other financial institutions at fixed rates
on a non-recourse basis with its underlying equipment as
collateral as a credit risk reduction tool. In the event of
a default by customer on these leases, the other financial
institution has a first lien on the underlying leased equipment
and TCF is only entitled to residual proceeds in excess of
the outstanding borrowing balance. In these non-recourse
financings, the other financial institution has no further
recourse against TCF.
Note 12. Income Taxes
(In thousands)
Year ended December 31, 2009:
Current
Deferred
Total
Federal
State
Total
Year ended December 31, 2008:
Federal
State
Total
Year ended December 31, 2007:
Federal
State
Total
$ 4,311
6,285
$10,596
$33,775
1,483
$35,258
$ 38,086
7,768
$ 45,854
$46,627
1,715
$48,342
$24,191
4,169
$28,360
$ 70,818
5,884
$ 76,702
$91,170
3,100
$94,270
$13,900
(2,460)
$11,440
$105,070
640
$105,710
2009 Form 10-K : 61
The effective income tax rate differs from the federal
income tax rate of 35% as a result of the following.
Federal income tax rate
Increase (decrease) in income
tax expense resulting from:
State income tax, net
of federal income
tax benefit
Deductible stock dividends
Investments in affordable
Year Ended December 31,
2007
2008
35.00%
35.00%
2009
35.00%
3.81
(.85)
1.86
(1.60)
.11
(1.04)
housing
(1.42)
(.77)
(.60)
Changes in uncertain
tax positions
Compensation deduction
limitations
Deferred tax adjustments
due to law changes
Federal settlement of
prior year issue
Non-controlling interest
tax effect
Other, net
Effective income tax rate
(3.42)
.75
.35
–
.57
.77
(2.39)
.04
1.40
(.55)
–
(2.27)
.11
.27
34.60%
–
.07
37.30%
–
.08
28.38%
A reconciliation of the change in the gross amount,
before related tax effects, of unrecognized tax benefits
from January 1, 2009 to December 31, 2009 is as follows:
(In thousands)
Balance at January 1, 2009
Settlements with taxing authorities
Decreases related to lapses of applicable statutes
Other
Balance at December 31, 2009
$ 9,221
(4,621)
(2,027)
284
$ 2,857
The total amount of unrecognized tax benefits that,
if recognized, would affect the tax provision and the
effective income tax rate is $1.3 million, net of related
tax benefit effects.
TCF’s policy is to report interest and penalties, if any,
related to unrecognized tax benefits in income tax expense
in the Consolidated Statements of Income. The gross
amount of accrued interest on unrecognized tax benefits
was $372 thousand at December 31, 2009. TCF recorded
a reduction of accrued interest of $419 thousand and
$572 thousand during 2009 and 2008, respectively.
62 : TCF Financial Corporation and Subsidiaries
TCF’s federal income tax returns are open and subject
to examination from the 2007 tax return year and forward.
TCF’s various state income tax returns are generally open
from the 2005 and later tax return years based on individual
state statutes of limitation. Changes in the amount of
unrecognized tax benefits within the next twelve months
from normal expirations of statutes of limitation are not
expected to be material. TCF is under examination by
certain states. TCF does not currently expect to resolve
these examinations within the next twelve months.
Developments in these examinations or other events could
cause management to change its judgment about the
amount of unrecognized tax benefits. Due to the amount
and nature of these possible events, an estimate of the
range of reasonably possible changes in the amount of
unrecognized tax benefits cannot be made.
The significant components of the Company’s deferred
tax assets and deferred tax liabilities are as follows.
(In thousands)
Deferred tax assets:
Allowance for loan and lease losses
Stock compensation and deferred
compensation plans
Net operating losses
Pension and postretirement benefits
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Lease financing
Loan fees and discounts
Premises and equipment
Prepaid expenses
Investment in FHLB stock
Investments in affordable housing
Securities available for sale
Other
Total deferred tax liabilities
Net deferred tax liabilities
At December 31,
2009
2008
$ 79,030
$ 60,795
18,903
11,891
984
10,514
(3,832)
117,490
211,360
22,926
14,068
8,595
3,134
2,960
812
9,196
273,051
$155,561
18,599
7,811
4,870
9,458
(1,499)
100,034
154,220
25,237
14,241
7,877
3,134
3,442
13,615
7,416
229,182
$129,148
Note 13. Equity
Restricted Retained earnings Retained earnings at TCF
National Bank, a wholly owned subsidiary of TCF Financial
Corporation, at December 31, 2009 includes approxi-
mately $134.4 million for which no provision for federal
income taxes has been made. This amount represents earn-
ings legally appropriated to thrift bad debt reserves and
deducted for federal income tax purposes in prior years and
is generally not available for payment of cash dividends
or other distributions to shareholders. Future payments or
distributions of these appropriated earnings could invoke
a tax liability for TCF based on the amount of the distribu-
tions and the tax rates in effect at that time.
Treasury Stock and Other Treasury stock and other
consists of the following.
(In thousands)
Treasury stock, at cost
Shares held in trust for deferred
compensation plans, at cost
Total
At December 31,
2009
2008
$(29,435) $ (88,404)
(22,240)
(21,392)
$(50,827) $(110,644)
No repurchases of common stock were made in 2009 or
2008. TCF purchased 3.9 million shares of its common stock
during the year ended December 31, 2007. At December
31, 2009, TCF had 5.4 million shares remaining in its stock
repurchase programs authorized by the Board.
Shares Held in Trust for Deferred Compensation
Plans TCF has maintained certain deferred compensation
plans that previously allowed eligible executives, senior
officers and certain other employees to defer payment of
up to 100% of their base salary and bonus as well as grants
of restricted stock. In October of 2008, TCF terminated
these plans for those participants who elected to do so.
Directors are allowed to defer up to 100% of their fees
and restricted stock awards. TCF also has a supplemen-
tal nonqualified Employee Stock Purchase Plan in which
certain employees can contribute from 0% to 50% of their
salary and bonus. TCF matching contributions to this plan
totaled $463 thousand and $894 thousand in 2009 and
2008, respectively. The company made no other contribu-
tions to these plans, other than payment of administra-
tive expenses. The amounts deferred were invested in TCF
stock or other publicly traded stocks, bonds or mutual
funds. At December 31, 2009, the fair value of the assets
in the plans totaled $28 million and included $20.5 million
invested in TCF common stock compared with a total fair
value of $28.1 million, including $22.6 million invested in
TCF common stock at December 31, 2008. The cost of TCF
common stock held by TCF’s deferred compensation plans
is reported separately in a manner similar to treasury stock
(that is, changes in fair value are not recognized) with a
corresponding deferred compensation obligation reflected
in additional paid-in capital.
Preferred Stock On April 22, 2009, TCF redeemed all of
the 361,172 outstanding shares of its Fixed-Rate Cumulative
Perpetual Preferred Stock, Series A, $.01 Par Value. Upon
redemption, the difference of $12 million between the
preferred stock redemption amount and the recorded
amount was charged to retained earnings as a non-cash
deemed preferred stock dividend. This non-cash deemed
preferred stock dividend had no impact on total equity, but
reduced earnings per diluted common share by 10 cents.
warrants At December 31, 2009, TCF had 3,199,988
warrants outstanding with a strike price of $16.93 per
share. The warrants are publicly traded on the New York
Stock Exchange under the symbol “TCB WS”.
2009 Form 10-K : 63
Note 14. Regulatory Capital Requirements
TCF is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain
mandatory, and possible additional discretionary, actions
by the federal banking agencies that could have a material
adverse effect on TCF. In general, TCF Bank may not declare
or pay a dividend to TCF in excess of 100% of its net retained
profits for the current year combined with its retained net
profits for the preceding two calendar years, which was
$158.3 million at December 31, 2009, without prior approval
of the OCC. TCF Bank’s ability to make capital distributions
in the future may require regulatory approval and may be
restricted by its regulatory authorities. TCF Bank’s ability to
make any such distributions will also depend on its earnings
and ability to meet minimum regulatory capital requirements
in effect during future periods. These capital adequacy
standards may be higher in the future than existing minimum
regulatory capital requirements.
The following table sets forth TCF’s and TCF National Bank’s regulatory tier 1 leverage, tier 1 risk-based and total risk-
based capital levels, and applicable percentages of adjusted assets, together with the stated minimum and well-capitalized
capital ratio requirements.
(Dollars in thousands)
as of December 31, 2009:
Tier 1 leverage capital
TCF
TCF National Bank
Tier 1 risk-based capital
TCF
TCF National Bank
Total risk-based capital
TCF
TCF National Bank
As of December 31, 2008:
Tier 1 leverage capital
TCF
TCF National Bank
Tier 1 risk-based capital
TCF
TCF National Bank
Total risk-based capital
TCF
TCF National Bank
N.A. Not Applicable.
Actual
Minimum
Capital Requirement
Well-Capitalized
Capital Requirement
Amount
Ratio
Amount
Ratio
Amount
Ratio
$1,161,750
1,103,875
1,161,750
1,103,875
1,514,940
1,456,858
6.59%
6.27
$ 528,681
527,836
3.00%
3.00
N.a.
$ 879,727
8.52
8.11
11.12
10.70
545,115
544,648
1,090,230
1,089,297
4.00
4.00
8.00
8.00
817,672
816,972
1,362,787
1,361,621
$ 1,461,973
1,364,053
8.97%
8.41
$ 488,950
486,552
3.00%
3.00
N.A.
$ 810,920
1,461,973
1,364,053
1,817,225
1,718,476
11.79
11.06
14.65
13.93
496,059
493,388
992,117
986,776
4.00
4.00
8.00
8.00
744,088
740,082
1,240,147
1,233,470
N.a.
5.00%
6.00
6.00
10.00
10.00
N.A.
5.00%
6.00
6.00
10.00
10.00
The minimum and well capitalized requirements are determined by the FRB for TCF and by the OCC for TCF National Bank
pursuant to the FDIC Improvement Act of 1991. At December 31, 2009, TCF and TCF National Bank exceeded their regulatory
capital requirements and are considered “well-capitalized”.
64 : TCF Financial Corporation and Subsidiaries
Note 15. Stock Compensation
The TCF Financial Incentive Stock Program (the “Program”)
was adopted to enable TCF to attract and retain key per-
sonnel. At December 31, 2009, there were 5,047,452 shares
reserved for issuance under the Program.
At December 31, 2009, there were 158,611 shares of
performance-based restricted stock that will vest only
if certain return on equity goals or service conditions, as
defined in the Program, are achieved. Failure to achieve
the goals and service conditions will result in all or a portion
of the shares being forfeited. Other restricted stock grants
vest over periods from ten months to seven years. The
weighted-average grant date fair value of restricted stock
was $10.33, $12.50 and $26.81 for shares granted in 2009,
2008 and 2007, respectively. Compensation expense for
restricted stock and stock options totaled $8.1 million, $5.7
million and $7.1 million in 2009, 2008 and 2007, respectively.
The recognized tax loss for stock compensation expense
was $3 million, $2 million and $2.4 million in 2009, 2008
and 2007, respectively. Unrecognized stock compensation
expense for restricted stock awards and stock options were
$17.3 million with a weighted-average remaining amortiza-
tion period of 1.6 years at December 31, 2009, compared
with $20.8 million with a weighted-average remaining
amortization period of 2.4 years at December 31, 2008 and
$13.8 million with a weighted-average remaining amorti-
zation period of 1.4 years at December 31, 2007.
TCF has also issued stock options under the Program that
generally become exercisable over a period of one to 10
years from the date of the grant and expire after 10 years.
All outstanding options have a fixed exercise price equal to
the market price of TCF common stock on the date of grant.
The following table reflects TCF’s stock option and restricted stock transactions under the Program since December 31, 2006.
Restricted Stock
Stock Options
Exercise Price
Outstanding at December 31, 2006
Granted
Exercised
Forfeited
Vested
Outstanding at December 31, 2007
Granted
Exercised
Forfeited
Vested
Outstanding at December 31, 2008
Granted
exercised
Forfeited
Vested
Outstanding at December 31, 2009
exercisable at December 31, 2009
N.A. Not Applicable.
Shares
Price Range
2,619,341 $ 9.87 - $30.28
24.26 - 28.64
198,850
–
–
(140,775)
9.87 - 30.13
(152,200) 20.38 - 26.39
9.87 - 30.28
2,525,216
9.41 - 17.37
753,650
–
–
(222,850) 17.37 - 30.28
9.87 - 28.02
9.41 - 30.28
8.29 - 13.43
–
(481,000) 10.37 - 28.71
(254,433) 17.33 - 30.28
7.57 - 30.28
1,870,845
N.a.
N.a.
(1,168,499)
1,887,517
718,761
–
Shares
–
(87,083)
–
–
144,050
2,626,000
(13,000)
(383,631)
–
2,373,419
–
Range
231,133 $11.78 - $16.64
–
11.78 - 16.64
–
–
11.78 - 16.09
12.85 - 15.75
11.78 - 14.30
15.03 - 16.09
–
11.78 - 15.75
–
(108,800) 11.78 - 14.52
(56,000) 11.78 - 15.75
–
12.85 - 15.75
–
–
2,208,619
–
Weighted-
Average
$13.93
–
13.96
–
–
13.91
14.65
12.56
15.74
–
14.44
–
14.14
14.95
–
14.44
–
2009 Form 10-K : 65
The following table summarizes information about stock options outstanding at December 31, 2009.
Exercise price range
$12.85 - $15.75
Stock Options Outstanding
Stock Options Exercisable
Weighted-
Average
Exercise
Price
$14.44
Weighted-
Average
Remaining
Contractual
Life in Years
8.26
Shares
2,208,619
Weighted-
Average
Exercise
Price
$ –
Shares
–
Additional valuation and related assumption information
for TCF’s stock option plans related to options issued in
2008 is presented below.
Expected volatility
Weighted-average volatility
Expected dividend yield
Expected term (in years)
Risk-free interest rate
28.5%
28.5%
3.5%
6.25 - 6.75
2.58 - 2.91%
Note 16. Employee Benefit Plans
employees Stock Purchase Plan The TCF Employees
Stock Purchase Plan generally allows participants to make
contributions of up to 50% of their covered compensation
on a tax-deferred basis, subject to the annual covered
compensation limitation imposed by the Internal Revenue
Service (“IRS”). TCF matches the contributions of all
participants with TCF common stock at the rate of 50 cents
per dollar for employees with one through four years of
service, up to a maximum company contribution of 3% of
the employee’s covered compensation, 75 cents per dollar
for employees with five through nine years of service, up to
a maximum company contribution of 4.5% of the employee’s
covered compensation, and $1 per dollar for employees
with 10 or more years of service, up to a maximum company
contribution of 6% of the employee’s covered compensation,
subject to the annual covered compensation limitation
imposed by the IRS. Employee contributions vest immediately
while the Company’s matching contributions are subject
to a graduated vesting schedule based on an employee’s
years of service with full vesting after five years. Employees
have the opportunity to diversify and invest their account
balance, including matching contributions, in various
mutual funds or TCF common stock. At December 31, 2009,
the fair value of the assets in the plan totaled $143.8
million and included $111.3 million invested in TCF common
stock. The Company’s matching contributions are expensed
when made. TCF’s contributions to the plan were $6.9
million, $6.9 million and $6.6 million in 2009, 2008 and
2007, respectively.
Pension Plan The TCF Cash Balance Pension Plan (the
“Pension Plan”) is a qualified defined benefit plan covering
eligible employees who are at least 21 years old and have
completed a year of eligibility service with TCF. Employees
hired after June 30, 2004 are not eligible to participate in
the Pension Plan. Effective March 31, 2006, TCF amended
the Pension Plan to discontinue compensation credits
for all participants. Interest credits will continue to be
paid until participants’ accounts are distributed from the
Pension Plan. Each month TCF credits participant accounts
with interest on the account balance based on the five-year
Treasury rate plus 25 basis points determined at the begin-
ning of each year. All participant accounts are vested.
The measurement of the projected benefit obligation,
prepaid pension asset, pension liability and annual pension
expense involves complex actuarial valuation methods and
the use of actuarial and economic assumptions. Due to the
long-term nature of the pension plan obligation, actual
66 : TCF Financial Corporation and Subsidiaries
results may differ significantly from the actuarial-based
estimates. Differences between estimates and actual
experience are required to be deferred and under certain
circumstances amortized over the future expected working
lifetime of plan participants. As a result, these differences
are not recognized when they occur. TCF closely monitors all
assumptions and updates them annually.
TCF accounts for the Pension Plan in accordance with
Financial Accounting Standard Codification (FASC) 715
“Compensation — Retirement Benefits”. FASC 715 requires
companies to reflect each defined benefit and other post-
retirement benefits plan’s funded status on the company’s
balance sheet. TCF implemented these provisions for the
year ended December 31, 2006. TCF changed its measure-
ment date to December 31 in 2008 as required by FASC
715. TCF recorded a $65 thousand credit to January 1, 2008
retained earnings for adoption of FASC 715 measurement
date change. The Company does not consolidate the assets
and liabilities associated with the Pension Plan.
Postretirement Plan TCF provides health care ben-
efits for eligible retired employees (the “Postretirement
Plan”). Employees retiring after December 31, 2009 are no
longer eligible to participate in the Postretirement Plan.
Effective January 1, 2000, TCF modified the Postretirement
Plan for employees not yet eligible for benefits under the
Postretirement Plan by eliminating the Company subsidy.
The plan provisions for full-time and retired employees
then eligible for these benefits were not changed. The
Postretirement Plan is not funded.
The following table sets forth the status of the Pension Plan and the Postretirement Plan at the dates indicated.
(In thousands)
Benefit obligation:
Accrued participant balance — vested
Present value of future service and benefits
Total projected benefit obligation
Accumulated benefit obligation
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost — benefits earned during the year
Interest cost on projected benefit obligation
Actuarial loss (gain)
Benefits paid
Projected benefit obligation at end of year
Change in fair value of plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
TCF contributions
Fair value of plan assets at end of year
Funded status of plans at end of year
Amounts recognized in Statements of Financial Condition:
Prepaid (accrued) benefit cost at end of year
Amounts not yet recognized in net periodic benefit cost and included
in accumulated other comprehensive loss, before tax:
Transition obligation
Accumulated actuarial net loss
Accumulated other comprehensive loss, before tax
Total recognized asset (liability)
(1) 15 months in 2008 due to FASC 715 measurement date change.
N.A. Not Applicable.
Pension Plan
Year Ended December 31,
2009
2008(1)
Postretirement Plan
Year Ended December 31,
2008(1)
2009
$50,933
(2,109)
$48,824
$48,824
$49,049
–
2,918
935
(4,078)
48,824
38,624
13,559
(4,078)
2,500
50,605
$ 1,781
$ 53,156
(4,107)
$ 49,049
$ 49,049
$ 52,456
–
3,668
(1,733)
(5,342)
49,049
67,506
(28,540)
(5,342)
5,000
38,624
$(10,425)
N.a.
N.a.
N.a.
N.a.
$ 8,384
7
495
892
(612)
9,166
–
–
(612)
612
–
$(9,166)
N.A.
N.A.
N.A.
N.A.
$ 9,491
15
670
(492)
(1,300)
8,384
–
–
(1,300)
1,300
–
$(8,384)
$ 1,781
$(10,425)
$(9,166)
$(8,384)
–
27,020
27,020
$28,801
–
38,788
38,788
$ 28,363
11
4,277
4,288
$(4,878)
15
3,637
3,652
$(4,732)
2009 Form 10-K : 67
At December 31, 2009, assets held in trust for the Pension Plan included investments in mutual funds and money market
funds. The fair value of these assets is based upon quotes from independent asset pricing services for identical assets
based on active markets, which are considered level 1 under Financial Accounting Standards Codification (FASC) No. 820,
Fair Value Measurements and Disclosures, and are measured on a recurring basis.
The following table sets forth the changes recognized in accumulated other comprehensive loss at the dates indicated.
(In thousands)
Accumulated other comprehensive loss
at the beginning of the year
Impact of plan amendments on
transition obligation
Actuarial net (gain) loss arising
during the period
Amortizations (recognized in net
periodic benefit cost):
Transition obligation
Actuarial loss
Settlement expense
Measurement date change
Total recognized in other
comprehensive (income) loss
Accumulated other comprehensive loss
at end of year, before tax
Pension Plan
Year Ended December 31,
2009
2008
2007
2009
Postretirement Plan
Year Ended December 31,
2008
2007
$ 38,788
$ 7,221
$16,410
$3,652
$4,538
$4,171
–
–
–
(7,495)
33,130
(5,530)
–
(1,263)
(3,010)
–
–
(859)
(490)
(214)
—
(1,997)
(1,662)
–
(11,768)
31,567
(9,189)
–
892
(4)
(252)
–
–
636
–
(492)
(4)
(311)
–
(79)
(886)
(484)
1,175
(101)
(223)
–
–
367
$ 27,020
$38,788
$ 7,221
$4,288
$3,652
$4,538
The measurement dates used for determining the Pension Plan and the Postretirement Plan projected and accumulated
benefit obligations and the dates used to value plan assets were December 31, 2009 and December 31, 2008. The discount
rate used to measure the benefit obligation of the Pension Plan was 5.5% for the year ended December 31, 2009 and 6.25%
for the year ended December 31, 2008. The discount rate used to measure the benefit obligation of the Postretirement Plan
was 5.25% for the year ended December 31, 2009 and 6.25% for the year ended December 31, 2008.
Net periodic benefit cost (income) included in compensation and employee benefits expense consists of the following.
Pension Plan
Year Ended December 31,
(In thousands)
Interest cost
Expected return on plan assets
Service cost
Recognized actuarial loss
Settlement expense
Amortization of transition obligation
Net periodic benefit cost (income)
2009
$ 2,918
(5,129)
–
1,263
3,010
–
$ 2,062
2008
$ 2,934
(5,059)
–
859
490
–
$ (776)
2007
$ 2,930
(4,938)
–
1,997
1,662
–
$ 1,651
Postretirement Plan
Year Ended December 31,
2008
$537
–
12
310
–
4
$863
2009
$495
–
7
252
–
4
$758
2007
$491
–
17
223
–
101
$832
The discount rate, the expected long-term rate of return on plan assets and the rate of increase in future compensation
used to determine the net benefit cost were as follows.
Assumptions used to
determine net benefit cost
Discount rate
Expected long-term rate of
return on plan assets
N.A. Not Applicable.
Pension Plan
Year Ended December 31,
2008
6.00%
8.50
2009
6.25%
8.50
2007
5.50%
8.50
2009
6.25%
N.a.
Postretirement Plan
Year Ended December 31,
2008
6.00%
N.A.
2007
5.50%
N.A.
68 : TCF Financial Corporation and Subsidiaries
The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic
benefit cost during 2010 are as follows.
(In thousands)
Actuarial net loss
Settlement expense
Prior service cost
Transition obligation
Net loss
Pension Plan
$1,564
1,771
30
–
$3,365
Postretirement
Plan
$313
–
–
4
$317
Total
$1,877
1,771
30
4
$3,682
TCF’s Pension Plan assets are invested in index mutual
funds that are designed to mirror the performance of the
Standard and Poor’s 500 and the Morgan Stanley Capital
International U.S. Mid-Cap 450 indexes, at targeted
weightings of 75% and 25%, respectively.
The actuarial assumptions used in the Pension Plan
valuation are reviewed annually. The expected long-term
rate of return on plan assets is determined by reference
to historical market returns and future expectations. The
10-year weighted-average return of the indexes consistent
with the Plan’s current investment strategy was 1.5%, net
of administrative expenses, and was significantly impacted
by the market events of 2008. Although past performance
is no guarantee of the future results, TCF is not aware of any
reasons why it should not be able to achieve the assumed
future average long-term annual returns of 8.5%, net of
administrative expenses, on plan assets over complete
market cycles. A 1% difference in the expected return on
plan assets would result in a $583 thousand change in net
periodic pension expense.
The discount rate used to determine TCF’s pension and
postretirement benefit obligations as of December 31,
2009 and December 31, 2008 was determined by matching
estimated benefit cash flows to a yield curve derived from
corporate bonds rated AA by Moody’s. Bonds containing
call or put provisions were excluded. The average estimated
duration of TCF’s Pension and Postretirement Plans varied
between seven and eight years.
The actual return (loss) on plan assets, net of administra-
tive expenses was 32.8% for the 12 months ended December
31, 2009 and (50.8)% for the 15 months ended December
31, 2008. The actual gain on plan assets for the 12 months
ended December 31, 2009 decreased the actuarial loss by
$8.4 million. The decrease in the discount rate from 6.25%
at December 31, 2008 to 5.5% at December 31, 2009
increased the actuarial loss by $2.2 million. Various plan
participant census changes increased the actuarial loss by
$250 thousand during the 12 months ended December 31,
2009. The decrease in the interest crediting rate from 5% at
December 31, 2008 to 4.5% at December 31, 2009 reduced
the actuarial loss by $1.5 million for the 12 months ended
December 31, 2009. The accumulated other comprehensive
loss in excess of the 10% of the greater of the accumulated
benefit obligation or fair value of the plan assets is
amortized over approximately seven years.
For 2009, TCF is eligible to contribute up to $20 million to
the Pension Plan until the 2009 federal income tax return
extension due date under various IRS funding methods. During
2009, TCF contributed $2.5 million to the Pension Plan. TCF
does not expect to be required to contribute to the Pension
Plan in 2010. TCF expects to contribute $979 thousand to the
Postretirement Plan in 2010. TCF contributed $612 thousand to
the Postretirement Plan for the 12 months ended December 31,
2009. TCF currently has no plans to pre-fund the Postretirement
Plan in 2010.
The following are expected future benefit payments used
to determine projected benefit obligations.
(In thousands)
2010
2011
2012
2013
2014
2015-2019
Pension Postretirement
Plan
$ 979
946
927
904
876
3,844
Plan
$ 4,762
4,166
4,175
3,781
4,010
16,768
2009 Form 10-K : 69
The following table presents assumed health care cost
trend rates for the Postretirement Plan at December 31,
2009 and 2008.
Health care cost trend rate
assumed for next year
Final health care cost trend rate
Year that final health care trend
rate is reached
2009
2008
7.75%
5%
8%
5%
2023
2012
Assumed health care cost trend rates have an effect on
the amounts reported for the Postretirement Plan. A 1%
change in assumed health care cost trend rates would have
the following effects:
(In thousands)
Effect on total of service and
interest cost components
Effect on postretirement
benefits obligations
1-Percentage-Point
Decrease
Increase
$ 21
$ (19)
325
(313)
Note 17. Financial Instruments with Off-Balance Sheet Risk
Commitments to extend Credit Commitments to extend
credit are agreements to lend provided there is no violation
of any condition in the contract. These commitments
generally have fixed expiration dates or termination
clauses and may require payment of a fee. Since certain
of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not neces-
sarily represent future cash requirements. Collateral to
secure these commitments predominantly consists of
residential and commercial real estate.
Standby letters of Credit and Guarantees on
Industrial Revenue Bonds Standby letters of credit and
guarantees on industrial revenue bonds are conditional
commitments issued by TCF guaranteeing the performance
of a customer to a third-party. These conditional commit-
ments expire in various years through the year 2012.
Collateral held primarily consists of commercial real estate
mortgages. Since the conditions under which TCF is required
to fund these commitments may not materialize, the
cash requirements are expected to be less than the total
outstanding commitments.
TCF is a party to financial instruments with off-balance sheet
risk, primarily to meet the financing needs of its customers.
These financial instruments, which are issued or held for
purposes other than trading, involve elements of credit and
interest-rate risk in excess of the amount recognized in the
Consolidated Statements of Financial Condition.
TCF’s exposure to credit loss, in the event of non-
performance by the counterparty to the financial instru-
ment, for commitments to extend credit and standby
letters of credit is represented by the contractual amount
of the commitments. TCF uses the same credit policies in
making these commitments as it does for making direct
loans. TCF evaluates each customer’s creditworthiness on
a case-by-case basis. The amount of collateral obtained is
based on management’s credit evaluation of the customer.
Financial instruments with off-balance sheet risk are
summarized as follows:
(In thousands)
Commitments to extend credit:
At December 31,
2009
2008
Consumer real estate and other
Commercial
Leasing and equipment finance
Inventory finance
Other
$1,596,706
336,428
124,898
–
–
$1,800,782
393,187
86,909
–
108
Total commitments to
extend credit
2,058,032
2,280,986
Standby letters of credit and guarantees
on industrial revenue bonds
Total
39,281
$2,097,313
58,697
$2,339,683
70 : TCF Financial Corporation and Subsidiaries
Note 18. Fair Value Measurement
Effective January 1, 2008, TCF adopted FASC 820, Fair Value
Measurements and Disclosures. FASC 820 defines fair value
and establishes a consistent framework for measuring fair
value and expands disclosure requirements for fair value
measurements. Fair values represent the estimated price
that would be received from selling an asset or paid to
transfer a liability, otherwise known as an “exit price”.
The following is a description of valuation methodolo-
gies used for assets recorded at fair value on a recurring
basis at December 31, 2009.
Securities available for Sale At December 31, 2009,
securities available for sale consisted primarily of U.S.
Government Sponsored Enterprise securities. The fair
value of available for sale securities is recorded using
prices obtained from independent asset pricing services
that are based on observable transactions, but not a
quoted market.
The fair value of other securities for which there is little
or no market activity, is categorized as Level 3. Other
securities classified as Level 3 include equity investments
in other financial institutions and foreign debt securities.
The fair value of these assets is determined by using quoted
prices, when available and incorporating results of internal
pricing techniques, which consider observable market
information along with security specific information. The
fair value of other securities were written down $2.5 million,
which is included in gains on securities, net, during the year
ended December 31, 2009.
assets Held in Trust for Deferred Compensation At
December 31, 2009, assets held in trust for deferred
compensation plans included investments in publicly traded
stocks, other than TCF stock, and mutual funds. The fair
value of these assets is based upon prices obtained from
independent asset pricing services based on active markets.
At December 31, 2009, the fair value of assets measured on a recurring basis are:
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Other securities
Assets held in trust for deferred compensation plans (4)
Total assets
Readily
Available
Market Prices(1)
Observable
Market
Prices(2) Market Prices(3)
Company
Determined
Total at
Fair Value
$ –
–
7,511
$7,511
$1,905,209
–
–
$1,905,209
$ –
5,267
–
$5,267
$1,905,209
5,267
7,511
$1,917,987
(1) Considered Level 1 under FASC 820, Fair Value Measurements and Disclosures.
(2) Considered Level 2 under FASC 820, Fair Value Measurements and Disclosures.
(3) Considered Level 3 under FASC 820, Fair Value Measurements and Disclosures, and is based on valuation models that use significant assumptions that are not observable
in an active market.
(4) A corresponding liability is recorded in other liabilities for TCF’s obligation to the participants in these plans.
2009 Form 10-K : 71
The change in the balance sheet carrying values associated
with Company determined market priced financial assets
carried at fair value during the year ended December 31, 2009
was not significant.
Effective January 1, 2009, TCF adopted Financial
Accounting Standards Codification (FASC) 820-10-65,
Transition and Open Effective Date Information, which
requires TCF to apply the provisions of FASC 820, Fair Value
Measurements and Disclosures, to non-financial assets
and liabilities measured on a non-recurring basis.
The following is a description of valuation methodologies
used for assets measured on a non-recurring basis.
long-lived assets Held for Sale Long-lived assets held
for sale include real estate owned and repossessed and
returned equipment. The fair value of real estate owned is
based on independent full appraisals, real estate broker’s
price opinions, or automated valuation methods, less esti-
mated selling costs. Certain properties require assumptions
that are not observable in an active market in the deter-
mination of fair value. The fair value of repossessed and
returned equipment is based on available pricing guides,
auction results or third-party price opinions, less estimated
selling costs. Assets that are acquired through foreclosure,
repossession or return are initially recorded at the lower of
the loan or lease carrying amount or fair value less esti-
mated selling costs at the time of transfer to real estate
owned or repossessed and returned equipment. Long-lived
assets held for sale were written down $15.5 million, which
is included in other non-interest expense, during the year
ended December 31, 2009.
The table below presents the balances of assets measured at fair value on a non-recurring basis at December 31, 2009.
(In thousands)
Loans (4)
Real estate owned (5)
Repossessed and returned equipment (5)
Total
Readily
Available
Market Prices(1)
Observable
Market
Prices(2) Market Prices(3)
Company
Determined
$ –
–
–
$ –
$ –
–
14,861
$14,861
$ 62,794
71,272
527
$134,593
Total at
Fair Value
$ 62,794
71,272
15,388
$149,454
(1) Considered Level 1 under FASC 820, Fair Value Measurements and Disclosures.
(2) Considered Level 2 under FASC 820, Fair Value Measurements and Disclosures.
(3) Considered Level 3 under FASC 820, Fair Value Measurements and Disclosures, and is based on valuation models that use significant assumptions that are not observable
in an active market.
(4) Represents the carrying value of loans for which adjustments are based on the appraisal value of the collateral.
(5) Amounts do not include assets held at cost at December 31, 2009.
Note 19. Fair Values of Financial Instruments
TCF is required to disclose the estimated fair value of
financial instruments, both assets and liabilities on and off
the balance sheet, for which it is practicable to estimate fair
value. These fair value estimates are made at December 31,
based on relevant market information and information about
the financial instruments. Fair value estimates are intended
to represent the price at which an asset could be sold at or
the price for which a liability could be settled for. However,
given there is no active market or observable market
transactions for many of TCF’s financial instruments, the
72 : TCF Financial Corporation and Subsidiaries
Company has made estimates of many of these fair values
which are subjective in nature, involve uncertainties and
matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could
significantly affect the estimated values. Beginning with
the year ended December 31, 2008, the fair value estimates
are determined in accordance with FASC 820.
The carrying amounts and fair values of the Company’s remaining financial instruments are set forth in the following table.
This information represents only a portion of TCF’s balance sheet and not the estimated value of the Company as a whole.
Non-financial instruments such as the value of TCF’s branches and core deposits, leasing operations and the future revenues from
TCF’s customers are not reflected in this disclosure. Therefore, use of this information to assess the value of TCF is limited.
At December 31,
2009
2008
Carrying
amount
estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
$ 299,127
163,692
1,910,476
$ 299,127
163,692
1,910,476
$ 342,380
155,725
1,966,104
$ 342,380
155,725
1,966,104
7,331,991
3,269,003
449,516
868,830
468,805
(244,471)
$14,516,969
$10,380,814
1,187,505
244,604
4,510,895
$16,323,818
7,090,772
3,112,313
424,122
878,168
468,746
–
$14,347,416
$10,380,814
1,191,176
244,604
4,816,727
$16,633,321
7,364,340
2,984,156
506,887
789,869
4,425
(172,442)
$13,941,444
$ 7,647,069
2,596,283
226,861
4,433,913
$14,904,126
7,199,684
2,860,293
488,821
790,970
4,425
–
$13,808,402
$ 7,647,069
2,612,874
226,861
4,964,682
$15,451,486
$ 35,860
(55)
$ 35,860
(55)
$ 38,730
(105)
$ 38,730
(105)
$ 35,805
$ 35,805
$ 38,625
$ 38,625
(In thousands)
Financial instrument assets:
Cash and due from banks
Investments
Securities available for sale
Loans:
Consumer real estate and other
Commercial real estate
Commercial business
Equipment finance loans
Inventory finance loans
Allowance for loan losses(1)
Total financial instrument assets
Financial instrument liabilities:
Checking, savings and money market deposits
Certificates of deposit
Short-term borrowings
Long-term borrowings
Total financial instrument liabilities
Financial instruments with off-balance-sheet risk:(2)
Commitments to extend credit(3)
Standby letters of credit(4)
Total financial instruments with
off-balance-sheet risk
(1) Expected credit losses are included in the estimated fair values.
(2) Positive amounts represent assets, negative amounts represent liabilities.
(3) Carrying amounts are included in other assets.
(4) Carrying amounts are included in accrued expenses and other liabilities.
The carrying amounts of cash and due from banks and
accrued interest payable and receivable approximate
their fair values due to the short period of time until their
expected realization. Securities available for sale and
assets held in trust for deferred compensation plans are
carried at fair value (see Note 18). Certain financial instru-
ments, including lease financings, discounted lease rentals
and all non-financial instruments are excluded from fair
value of financial instrument disclosure requirements.
The following methods and assumptions are used by the
Company in estimating fair value for its remaining financial
instruments, all of which are issued or held for purposes
other than trading.
Investments Short-term investments approximate their
fair values due to the short period of time until their
realization. The carrying value of investments in FHLB stock
and FRB stock approximates fair value. The fair value of
other investments is estimated based on discounting
cash flows at current market rates and consideration of
credit exposure.
loans The fair value of loans is estimated based on
discounted expected cash flows. These cash flows include
assumptions for prepayment estimates over the loans’
remaining life, considerations for the current interest rate
environment compared to the weighted average rate of each
portfolio, a credit risk component based on the historical
and expected performance of each portfolio and a liquidity
adjustment related to the current market environment.
Deposits The fair value of checking, savings and money
market deposits is deemed equal to the amount payable
on demand. The fair value of certificates of deposit is
estimated based on discounted cash flow analyses using
offered market rates. The intangible value of long-term
relationships with depositors is not taken into account in
the fair values disclosed.
2009 Form 10-K : 73
Borrowings The carrying amounts of short-term borrow-
ings approximate their fair values. The fair values of TCF’s
long-term borrowings are estimated based on observable
market prices and discounted cash flow analyses using
interest rates for borrowings of similar remaining maturities
and characteristics.
Financial Instruments with Off-Balance Sheet Risk
The fair value of TCF’s commitments to extend credit and
standby letters of credit are estimated using fees currently
charged to enter into similar agreements as commit-
ments and standby letters of credit similar to TCF’s are not
actively traded. Substantially all commitments to extend
credit and standby letters of credit have floating rates and
do not expose TCF to interest rate risk; therefore fair value
is approximately equal to carrying value.
Note 20. Earnings Per Common Share
Effective January 1, 2009, TCF adopted FASC 260-10-45-60,
Earnings Per Share: Participating Securities and the Two
Class Method. Entities with common stock and participating
securities are required to compute earnings per share using
the two-class method as described in FASC 260.
TCF’s restricted stock awards that pay non-forfeitable
common stock dividends meet the criteria of a participat-
ing security. Accordingly, earnings per share is calculated
using the two-class method, under which earnings are allo-
cated to both common shares and participating securities.
Basic and diluted earnings per share presented for the years
ended December 31, 2008 and 2007 were re-calculated in
accordance with these requirements, but did not change
amounts previously reported for 2008. Diluted earnings per
share for the year ended December 31, 2007 decreased from
$2.12 to $2.09.
74 : TCF Financial Corporation and Subsidiaries
The computation of basic and diluted earnings per common share is presented in the following table.
(In thousands, except per-share data)
Basic earnings Per Common Share
Net income
Preferred stock dividends
Non-cash deemed preferred stock dividend
Net income available to common stockholders
Earnings allocated to participating securities
Earnings allocated to common stock
Weighted-average shares outstanding
Restricted stock
Weighted-average common shares outstanding for basic earnings per common share
Basic earnings per common share
Diluted earnings Per Common Share
Earnings allocated to common stock
Weighted-average number of common shares outstanding adjusted
for effect of dilutive securities:
Weighted-average common shares outstanding used in basic earnings
per common share calculation
Net dilutive effect of:
Non-participating restricted stock
Stock options
Warrants
Weighted-average common shares outstanding for diluted
earnings per common share
Diluted earnings per common share
Year Ended December 31,
2009
2008
2007
$ 87,097
6,378
12,025
68,694
215
$ 68,479
127,592,824
(999,580)
126,593,244
$ .54
$ 128,958
2,540
–
126,418
488
$ 125,930
125,226,553
(283,880)
124,942,673
$ 1.01
$ 266,808
–
–
266,808
4,672
$ 262,136
125,398,110
–
125,398,110
$ 2.09
$ 68,479
$ 125,930
$ 262,138
126,593,244
124,942,673
125,398,110
229
167
–
–
18,872
–
–
76,340
–
126,593,640
$ .54
124,961,545
$ 1.01
125,474,450
$ 2.09
All shares of restricted stock are deducted from
weighted-average shares outstanding for the computation
of basic earnings per common share. Shares of performance-
based restricted stock are included in the calculation of
diluted earnings per common share, using the treasury
stock method, at the beginning of the quarter in which the
performance goals have been achieved. All other shares of
restricted stock, which vest over specified time periods,
stock options and warrants are included in the calculation
of diluted earnings per common share, using the treasury
stock method.
For the years ended December 31, 2009 and 2008, 6.5 mil-
lion and 4.4 million shares were outstanding, respectively,
related to non-participating restricted stock, stock options,
and warrants that were not included in the computation of
diluted earnings per share because they were anti-dilutive.
2009 Form 10-K : 75
Note 21. Comprehensive Income
Comprehensive income is the total of net income and other comprehensive income. The following table summarizes the components
of comprehensive income.
(In thousands)
Net income
Other comprehensive (loss) income:
Unrealized holding (losses) gains arising during the period
on securities available for sale
Recognized pension and postretirement actuarial gain (loss),
settlement expense and transition obligation
Pension and postretirement measurement date change
Reclassification adjustment for securities gains included in net income
Foreign currency translation adjustment
Income tax benefit (expense)
Total other comprehensive (loss) income
Comprehensive income
Year Ended December 31,
2009
$ 87,097
2008
$128,958
2007
$266,808
(3,253)
69,754
30,237
11,132
–
(31,828)
251
8,845
(14,853)
$ 72,244
(30,974)
293
(16,066)
1
(8,645)
14,363
$143,321
8,822
–
(13,278)
–
(8,910)
16,871
$283,679
Note 22. Other Expense
Other expense consists of the following.
(In thousands)
Card processing and issuance
Deposit account losses
Postage and courier
Telecommunications
Outside processing
Office supplies
Professional fees
Credit insurance
ATM processing
Separation costs
Other
Total other expense
Year Ended December 31,
2009
$ 19,792
14,076
13,816
11,726
10,821
9,281
8,504
7,395
6,615
4,641
49,632
$156,299
2008
$ 19,262
14,709
13,380
11,860
10,450
9,664
7,474
–
6,881
10,005
46,345
$150,030
2007
$ 18,134
17,629
13,663
11,790
9,296
9,581
6,939
–
8,647
1,411
51,773
$148,863
Note 23. Business Segments
Retail Banking, Wholesale Banking, Treasury Services
and Support Services have been identified as reportable
operating segments. Retail Banking includes branch
banking and retail lending. Wholesale Banking includes
commercial banking, leasing and equipment finance and
inventory finance. Treasury Services includes the Company’s
investment and borrowing portfolios and management of
capital, debt and market risks, including interest-rate and
liquidity risks. Support Services includes holding company
and corporate functions that provide data processing, bank
operations and other professional services to the operating
segments. In 2009, TCF changed the management structure
and therefore its segments. Prior periods have been
restated to reflect the current structure.
TCF evaluates performance and allocates resources based
on the segments’ net income. The business segments follow
generally accepted accounting principles as described in the
Summary of Significant Accounting Policies. TCF generally
accounts for inter-segment sales and transfers at cost.
76 : TCF Financial Corporation and Subsidiaries
The following table sets forth certain information of each of TCF’s reportable segments, including a reconciliation of TCF’s
consolidated totals.
(In thousands)
at or For the Year ended
December 31, 2009:
Revenues from external customers:
Interest income
Non-interest income
Total
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
Income after income tax expense
loss attributable to
non-controlling interest
Net income
Total assets
At or For the Year Ended
December 31, 2008:
Revenues from external customers:
Interest income
Non-interest income
Total
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense
Net income (loss)
Total assets
At or For the Year Ended
December 31, 2007:
Revenues from external customers:
Interest income
Non-interest income
Total
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
Net income
Total assets
Retail
Banking
Wholesale
Banking
Treasury
Services
Support
Services
Eliminations
Consolidated
$ 433,304
418,046
$ 851,350
$ 403,180
178,029
418,046
599,045
17,526
26,626
$ 408,876
77,238
$ 486,114
$ 206,277
78,693
77,238
156,204
17,432
31,186
$ 116,001
32,292
$ 148,293
$ 22,988
1,814
32,292
8,255
17,790
27,421
$ –
(1,721)
$ (1,721)
$ 561
–
142,261
148,262
(6,894)
1,454
$ –
—
$ –
$ –
–
(143,982)
(143,982)
–
–
$ 958,181
525,855
$ 1,484,036
$ 633,006
258,536
525,855
767,784
45,854
86,687
–
$ 26,626
$7,655,815
410
$ 31,596
$7,544,398
–
$ 27,421
$5,549,107
–
$ 1,454
$124,578
–
$ –
$(2,988,723)
410
$ 87,097
$17,885,175
$ 459,639
419,948
$ 879,587
$ 378,722
136,646
419,948
571,831
28,244
$ 61,949
$ 7,583,605
$ 359,914
60,639
$ 420,553
$ 147,139
52,834
60,639
119,072
14,018
$ 21,854
$ 6,200,288
$ 144,842
17,113
$ 161,955
$ 66,981
2,565
17,113
6,920
26,044
$ 48,565
$ 5,108,534
$ –
735
$ 735
$ 831
–
141,309
137,154
8,396
$ (3,410)
$ 94,605
$ –
–
$ –
$ –
–
(140,574)
(140,574)
–
$ –
$ (2,246,675)
$ 964,395
498,435
$ 1,462,830
$ 593,673
192,045
498,435
694,403
76,702
$ 128,958
$ 16,740,357
$ 467,089
460,839
$ 927,928
$ 390,141
45,476
460,839
543,756
89,191
$ 172,557
$ 7,505,723
$ 349,963
65,569
$ 415,532
$ 131,340
11,213
65,569
102,878
28,446
$ 54,372
$ 5,444,946
$ 150,971
14,037
$ 165,008
$ 28,120
303
14,037
7,388
11,934
$ 22,532
$ 4,796,708
$ –
1,012
$ 1,012
$ 576
–
138,636
145,726
(23,861)
$ 17,347
$ 100,938
$ –
–
$ –
$ –
–
(137,624)
(137,624)
–
$ –
$ (1,871,261)
$ 968,023
541,457
$ 1,509,480
$ 550,177
56,992
541,457
662,124
105,710
$ 266,808
$ 15,977,054
2009 Form 10-K : 77
Note 24. Parent Company Financial Information
TCF Financial Corporation’s (parent company only) condensed statements of financial condition as of December 31, 2009 and 2008,
and the condensed statements of income and cash flows for the years ended December 31, 2009, 2008 and 2007 are as follows.
Condensed Statements of Financial Condition
(In thousands)
Assets:
Cash and cash equivalents
Investment in bank subsidiaries
Accounts receivable from affiliates
Other assets
Total assets
Liabilities and Stockholders’ Equity:
Junior subordinated notes (trust preferred)
Other liabilities
Total liabilities
Equity
Total liabilities and equity
Condensed Statements of Income
(In thousands)
Interest income
Interest expense
Net interest expense
Dividends from TCF National Bank
Other non-interest income:
Affiliate service fees
Other
Total other non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
Other
Total non-interest expense
Income before income tax benefit and equity in undistributed earnings of subsidiaries
Income tax benefit
Income before equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of bank subsidiaries
Net income
Preferred stock dividends
Non-cash deemed preferred stock dividend
Net income available to common stockholders
At December 31,
2009
2008
$ 32,062
1,232,346
16,060
12,963
$1,293,431
110,441
7,628
118,069
1,175,362
$1,293,431
$ 33,557
1,541,371
16,272
20,442
$1,611,642
110,440
7,426
117,866
1,493,776
$1,611,642
Year Ended December 31,
2008
$ –
4,826
(4,826)
122,797
2007
$ –
603
(603)
194,558
2009
$ 44
12,369
(12,325)
32,000
9,127
(1,984)
7,143
9,844
365
1,487
11,696
15,122
5,169
20,291
66,806
87,097
6,378
12,025
$ 68,694
6,922
85
7,007
5,833
362
6,279
12,474
112,504
2,282
114,786
14,172
128,958
2,540
–
$126,418
12,241
142
12,383
11,866
440
1,581
13,887
192,451
1,502
193,953
72,855
266,808
–
–
$226,808
78 : TCF Financial Corporation and Subsidiaries
Condensed Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Year Ended December 31,
2009
2008
2007
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$ 87,097
$ 128,958
$ 266,808
Equity in undistributed earnings of bank subsidiaries
Other, net
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of premises and equipment, net
Net cash used by investing activities
Cash flows from financing activities:
Dividends paid on common stock
Dividends paid on preferred stock
Purchases of common stock
Recission of capital contribution
(Redemption)/Issuance of preferred stock
Interest paid on preferred trust securities
Sale of trust preferred securities
Capital infusions to TCF National Bank
Treasury shares sold to Employees Stock Purchase Plans
Net (decrease) increase in short-term borrowings
Stock compensation tax (expense) benefits
Other, net
Net cash used by financing activities
Net (decrease) increase in cash
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(66,806)
29,897
(36,909)
50,188
(40)
(40)
(50,828)
(7,926)
–
361,172
(361,172)
(12,364)
–
(50)
19,147
–
(1,160)
1,538
(51,643)
(1,495)
33,557
$ 32,062
(14,172)
(6,394)
(20,566)
108,392
(40)
(40)
(126,447)
–
–
–
361,004
–
111,378
(434,092)
10,178
(9,500)
9,638
163
(77,678)
30,674
2,883
$ 33,557
(68,163)
1,188
(66,975)
199,833
(88)
(88)
(124,513)
–
(105,251)
–
–
–
–
–
–
9,500
4,534
1,216
(214,514)
(14,769)
17,652
$ 2,883
TCF Financial Corporation’s (parent company only)
operations are conducted through its banking subsidiaries
and other subsidiaries. As a result, TCF’s cash flow and abil-
ity to make dividend payments to its common stockholders
depend on the earnings of its subsidiaries. The ability of
TCF’s banking subsidiaries to pay dividends or make other
payments to TCF is limited by their obligations to maintain
sufficient capital and by other regulatory restrictions on
dividends. At December 31, 2009, TCF’s banking subsidiar-
ies could pay a total of approximately $158.3 million in
dividends to TCF without prior regulatory approval.
Additionally, retained earnings at TCF National Bank,
a wholly owned subsidiary of TCF Financial Corporation, at
December 31, 2009 includes approximately $134.4 million
for which no provision for federal income taxes has been
made. This amount represents earnings legally appropri-
ated to thrift bad debt reserves and deducted for federal
income tax purposes in prior years and is generally not
available for payment of cash dividends or other distribu-
tions to shareholders. Future payments or distributions of
these appropriated earnings could invoke a tax liability for
TCF based on the amount of the distributions and the tax
rates in effect at that time.
Note 25. Litigation Contingencies
From time to time, TCF is a party to legal proceedings arising
out of its lending, leasing and deposit operations. TCF is
and expects to become engaged in a number of foreclosure
proceedings and other collection actions as part of its
lending and leasing collection activities. From time to time,
borrowers and other customers, or employees or former
employees, have also brought actions against TCF, in some
cases claiming substantial damages. Financial services
companies are subject to the risk of class action litigation,
and TCF has had such actions brought against it from time
to time. Litigation is often unpredictable and the actual
results of litigation cannot be determined with certainty.
2009 Form 10-K : 79
Other Financial Data
The selected quarterly financial data presented below should be read in conjunction with the Consolidated Financial
Statements and related notes.
Selected Quarterly Financial Data (Unaudited)
(Dollars in thousands,
except per-share data)
Selected Financial Condition Data:
Loans and leases
Securities available for sale
Goodwill
Total assets
Total deposits
Short-term borrowings
Long-term borrowings
Total equity
Selected Operations Data:
Net interest income
Provision for credit losses
Net interest income after provision
for credit losses
Non-interest income:
Fees and other revenue
Gains on securities, net
Total non-interest income
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Loss attributable to non-controlling interest
Net income
Preferred stock dividends
Net income available to
common stockholders
Per common share:
Basic earnings
Diluted earnings
Dividends declared
Financial Ratios:
Return on average assets (1)
Return on average common equity (1)
Net interest margin (1)
Net charge-offs as a percentage
of average loans and leases (1)
Average total equity to average assets
(1) Annualized.
Dec. 31,
2009
Sept. 30,
2009
June 30,
2009
March 31,
2009
Dec. 31,
2008
Sept. 30,
2008
June 30,
2008
March 31,
2008
At
$14,590,744
1,910,476
152,599
17,885,175
11,568,319
244,604
4,510,895
1,179,755
$14,329,264
2,060,227
152,599
17,743,009
11,626,011
21,397
4,524,955
1,179,839
$13,962,656
2,087,406
152,599
17,475,721
11,619,053
25,829
4,307,098
1,142,535
$13,795,617
2,098,628
152,599
18,082,341
11,647,203
26,299
4,311,568
1,499,956
$13,345,889
1,966,104
152,599
16,740,357
10,243,352
226,861
4,433,913
1,493,776
$13,105,237
2,102,756
152,599
16,510,595
9,850,237
603,233
4,630,776
1,111,029
$12,976,931
2,120,664
152,599
16,460,123
10,146,122
411,802
4,515,997
1,088,301
$12,826,194
2,177,262
152,599
16,370,364
10,357,069
138,442
4,414,644
1,129,870
Dec. 31,
2009
Sept. 30,
2009
June 30,
2009
March 31,
2009
Dec. 31,
2008
Sept. 30,
2008
June 30,
2008
March 31,
2008
Three Months Ended
$ 169,641
77,389
$ 161,489
75,544
$ 156,463
61,891
$ 145,413
43,712
$ 147,117
47,050
$ 152,165
52,105
$ 151,562
62,895
$ 142,829
29,995
92,252
85,945
94,572
101,701
100,067
100,060
88,667
112,834
135,866
7,283
143,149
206,763
28,638
9,385
19,253
203
19,456
–
128,057
–
128,057
190,267
23,735
6,491
17,244
207
17,451
–
129,814
10,556
140,370
196,546
38,396
14,853
23,543
–
23,543
13,218
102,731
11,548
114,279
174,208
41,772
15,125
26,647
–
26,647
5,185
116,807
8,167
124,974
179,810
45,231
17,527
27,704
–
27,704
2,540
123,045
498
123,543
177,588
46,015
15,889
30,126
–
30,126
–
121,504
1,115
122,619
168,729
42,557
18,855
23,702
–
23,702
–
121,013
6,286
127,299
168,276
71,857
24,431
47,426
–
47,426
–
$ 19,456
$ 17,451
$ 10,325
$ 21,462
$ 25,164
$ 30,126
$ 23,702
$ 47,426
$ .15
$ .15
$ .05
$ .14
$ .14
$ .05
$ .08
$ .08
$ .05
$ .17
$ .17
$ .25
$ .20
$ .20
$ .25
$ .24
$ .24
$ .25
$ .19
$ .19
$ .25
$ .38
$ .38
$ .25
.43%
6.57
4.07
1.35
6.69
.39%
6.03
3.92
1.52
6.61
.53%
3.61
3.80
1.43
6.94
.62%
7.58
3.66
1.04
8.64
.68%
9.00
3.84
1.02
7.93
.73%
11.11
3.97
.82
6.61
.58%
8.57
4.00
.83
6.76
1.18%
17.08
3.84
.43
6.88
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
None.
80 : TCF Financial Corporation and Subsidiaries
Item 9A. Controls and Procedures
The Company carried out an evaluation, under the supervision
and with the participation of the Company’s management,
including the Company’s Chief Executive Officer (Principal
Executive Officer), the Company’s Chief Financial Officer
(Principal Financial Officer) and its Controller and Assistant
Treasurer (Principal Accounting Officer), of the effectiveness
of the design and operation of the Company’s disclosure
controls and procedures pursuant to Exchange Act Rule
13a-15 under the Securities Exchange Act of 1934 (“Exchange
Act”). Based upon that evaluation, management concluded
that the Company’s disclosure controls and procedures are
effective, as of December 31, 2009. In October 2009, the
Company implemented a new commercial loan system.
The new system includes new operational and accounting
controls and procedures and was thoroughly tested and
reconciled as part of the development and conversion
process. There were no other significant changes in the
Company’s disclosure controls or internal controls over
financial reporting during the fourth quarter of 2009 that
have materially affected or are reasonably likely to materi-
ally affect TCF’s internal control over financial reporting.
As part of the Company’s reorganization of its man-
agement structure and business segments, a review was
completed in the fourth quarter of 2009 of the finance and
accounting operation. Decisions were made to reorganize
and centralize the decentralized finance and accounting
operation related to its previous banking segments and
certain corporate support areas. This reorganization and
centralization is expected to take up to nine months and
will likely change the internal control structure, as well
as be more efficient. Management has a formal project in
place to control and monitor these transitional activities
until the new centralized functions are in place.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintain-
ing adequate internal control over financial reporting for
TCF Financial Corporation (the Company). Internal control
over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles.
Internal control over financial reporting includes those
policies and procedures that pertain to the maintenance
of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of
the Company; provide reasonable assurance that transac-
tions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures
of the Company are only being made in accordance with
authorizations of management and directors of the
Company; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have
a material effect on the financial statements.
Management completed an assessment of TCF’s internal
control over financial reporting as of December 31, 2009.
This assessment was based on criteria for evaluating internal
control over financial reporting established in Internal
Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management concluded that
TCF’s internal control over financial reporting was effective
as of December 31, 2009.
KPMG LLP, TCF’s registered public accounting firm that
audited the consolidated financial statements included in
this annual report, has issued an unqualified attestation
report on the effectiveness of the Company’s internal con-
trol over financial reporting as of December 31, 2009.
Any control system, no matter how well conceived and
operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
The design of a control system inherently has limitations, and
the benefits of controls must be weighed against their costs.
Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people,
or by management override of the controls. Therefore, no
assessment of a cost-effective system of internal controls
can provide absolute assurance that all control issues and
instances of fraud, if any, will be detected.
William A. Cooper
Chairman and Chief Executive Officer
Thomas F. Jasper
Executive Vice President and Chief Financial Officer
David M. Stautz
Senior Vice President, Controller and Assistant Treasurer
February 16, 2010
Report of Independent Registered Public Accounting Firm
2009 Form 10-K : 81
The Board of Directors and Stockholders
TCF Financial Corporation:
We have audited TCF Financial Corporation’s internal control
over financial reporting as of December 31, 2009, based
on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). TCF
Financial Corporation’s management is responsible for
maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the
accompanying Management Report. Our responsibility is to
express an opinion on TCF Financial Corporation’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards
of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was main-
tained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the mainte-
nance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accor-
dance with authorizations of management and directors
of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstate-
ments. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or
that the degree of compliance with the policies or proce-
dures may deteriorate.
In our opinion, TCF Financial Corporation maintained, in
all material respects, effective internal control over financial
reporting as of December 31, 2009, based on criteria estab-
lished in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United
States), the consolidated statements of financial condition
of TCF Financial Corporation and subsidiaries as of December
31, 2009 and 2008, and the related consolidated statements
of income, equity, and cash flows for each of the years in the
three-year period ended December 31, 2009, and our report
dated February 16, 2010 expressed an unqualified opinion on
those consolidated financial statements.
Minneapolis, Minnesota
February 16, 2010
Item 9B. Other Information
None.
82 : TCF Financial Corporation and Subsidiaries
Part III
Item 10. Directors, Executive
Officers and Corporate Governance
Information regarding directors and executive officers of
TCF is set forth in the following sections of TCF’s definitive
Proxy Statement dated on or about March 10, 2010 and
incorporated herein by reference: Election of Directors:
Background of the Nominees; Section 16(a) Beneficial
Ownership Reporting Compliance and Background of
Executive Officers Who are Not Directors.
Information regarding procedures for nominations of
Directors is set forth in the section entitled Election of
Directors: Corporate Governance — Director Nominations
and Additional Information in TCF’s definitive Proxy
Statement dated on or about March 10, 2010, and is
incorporated herein by reference.
Audit Committee and Financial Expert
Information regarding TCF’s separately standing Audit
Committee, its members and financial experts is set forth
in the section of TCF’s definitive Proxy Statement for
the 2010 Annual Meeting entitled Election of Directors:
Background of the Nominees and Election of Directors:
Board Committees, Committee Memberships, and Meetings
in 2009 and is incorporated herein by reference.
TCF’s Board of Directors is required to determine whether
it has at least one Audit Committee financial expert
and that the expert is independent. An Audit Committee
financial expert is a committee member who has an
understanding of generally accepted accounting principles
and financial statements and has the ability to assess
the general application of these principles in connection
with the accounting for estimates, accruals and reserves.
Additionally, this individual should have experience pre-
paring, auditing, analyzing or evaluating financial state-
ments that present the breadth and level of complexity of
accounting issues present in TCF’s financial statements.
The member should also have an understanding of internal
control over financial reporting as well as an understanding
of audit committee functions.
The Board has determined that Gerald A. Schwalbach,
the Audit Committee Chairman, George G. Johnson, Vance K.
Opperman and Douglas A. Scovanner meet the requirements
of audit committee financial experts. The Board has also
determined that Mr. Schwalbach, Mr. Johnson, Mr. Opperman
and Mr. Scovanner are independent. Additional informa-
tion regarding Mr. Schwalbach, Mr. Johnson, Mr. Opperman,
Mr. Scovanner and other directors is set forth in the section
Election of Directors: Background of the Nominees in TCF’s
definitive Proxy Statement dated on or about March 10,
2010 and is incorporated herein by reference.
Code of Ethics for Senior Financial Management
TCF adopted a Code of Ethics for Senior Financial Management
in March 2003. This Code of Ethics is available for review
at the Company’s website at www.tcfbank.com under the
“Corporate Governance” section. Any changes to or waivers
of violations of the Code of Ethics for Senior Financial
Management will be posted to the Company’s website.
2009 Form 10-K : 83
Item 13. Certain Relationships
and Related Transactions, and
Director Independence
Information regarding certain relationships and
transactions between TCF and management is set forth
in the section entitled Election of Directors: Director
Independence and Related Party Transactions of TCF’s
definitive Proxy Statement dated on or about March 10,
2010 and is incorporated herein by reference.
Item 14. Principal Accounting
Fees and Services
Information regarding principal accounting fees and
services and the Audit Committee’s pre-approval policies
and procedures relating to audit and non-audit services
provided by the Company’s independent registered public
accounting firm is set forth in the section entitled Audit
Committee Report in TCF’s definitive Proxy Statement
dated on or about March 10, 2010 and is incorporated
herein by reference.
Item 11. Executive Compensation
Information regarding compensation of directors and
executive officers of TCF is set forth in the following
sections of TCF’s definitive Proxy Statement dated on
or about March 10, 2010 and is incorporated herein by
reference: Election of Directors: Compensation of Directors;
Compensation Discussion and Analysis; Compensation
Committee Report; Summary Compensation Table; Grants
of Plan-Based Awards in 2009; Outstanding Equity Awards
at December 31, 2009; Option Exercises and Stock Vested
in 2009; Pension Benefits in 2009; Nonqualified Deferred
Compensation in 2009 and Potential Payments Upon
Termination or Change in Control.
Item 12. Security Ownership
of Certain Beneficial Owners
and Management and Related
Stockholder Matters
Information regarding ownership of TCF’s common stock
by TCF’s directors, executive officers, and certain other
shareholders and shares authorized under plans is set forth
in the sections entitled Election of Directors: TCF Stock
Ownership of Directors, Officers and 5% Owners and Equity
Compensation Plans Approved by Stockholders of TCF’s
definitive Proxy Statement dated on or about March 10,
2010 and is incorporated herein by reference.
84 : TCF Financial Corporation and Subsidiaries
Part IV
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statements, Financial Statement Schedules and Exhibits
1. F inancial Statements
The following consolidated financial statements of TCF and its subsidiaries, are filed as part of this report:
Description
Selected Financial Data
Consolidated Statements of Financial Condition at December 31, 2009 and 2008
Consolidated Statements of Income
for each of the years in the three-year period ended December 31, 2009
Consolidated Statements of Equity
for each of the years in the three-year period ended December 31, 2009
Consolidated Statements of Cash Flows
for each of the years in the three-year period ended December 31, 2009
Notes to Consolidated Financial Statements
Other Financial Data
Management’s Report on Internal Control Over Financial Reporting
P ag e
16
46
47
48
49
50
79
80
Reports of Independent Registered Public Accounting Firm
45, 81
2. F inancial Statement Schedules
All schedules to the Consolidated Financial Statements normally required by the applicable accounting
regulations are included in the Consolidated Financial Statements or the Notes thereto.
3. ex h ib its
See Index to Exhibits on page 86 of this report.
2009 Form 10-K : 85
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 and Chief Executive Officer
Dated: February 16, 2010
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.
N ame
/s/ William A. Cooper
William A. Cooper
/s/ Thomas F. Jasper
Thomas F. Jasper
/s/ David M. Stautz
David M. Stautz
/s/ Gregory J. Pulles
Gregory J. Pulles
/s/ Peter Bell
Peter Bell
/s/ William F. Bieber
William F. Bieber
/s/ Theodore J. Bigos
Theodore J. Bigos
/s/ Thomas A. Cusick
Thomas A. Cusick
/s/ Luella G. Goldberg
Luella G. Goldberg
/s/ George G. Johnson
George G. Johnson
/s/ Vance K. Opperman
Vance K. Opperman
/s/ Gerald A. Schwalbach
Gerald A. Schwalbach
/s/ Douglas A. Scovanner
Douglas A. Scovanner
/s/ Ralph Strangis
Ralph Strangis
/s/ Barry N. Winslow
Barry N. Winslow
Title
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Da te
February 16, 2010
February 16, 2010
Senior Vice President, Controller
and Assistant Treasurer (Principal Accounting Officer)
February 16, 2010
Director, Vice Chairman and Secretary
February 16, 2010
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 16, 2010
February 16, 2010
February 16, 2010
February 16, 2010
February 16, 2010
February 16, 2010
February 16, 2010
February 16, 2010
February 16, 2010
February 16, 2010
Director and Vice Chairman
February 16, 2010
86 : TCF Financial Corporation and Subsidiaries
Index to Exhibits
ex h ibi t
No .
3(a)
3(b)
4(a)
4(b)
4(c)
4(d)
4(e)
4(f)
4(g)
4(h)
4(i)
4(j)
Description
Amended and Restated Certificate of Incorporation of TCF Financial Corporation, as amended through
November 13, 2008 [incorporated by reference to Exhibit 3.1 to TCF Financial Corporation’s Registration
Statement on Form S-3 filed December 11, 2008]
Amended and Restated Bylaws of TCF Financial Corporation [incorporated by reference to Exhibit 3(b)
to TCF Financial Corporation’s Current Report on Form 8-K filed April 28, 2008]
Form of Certificate for Fixed Rate Cumulative Perpetual Preferred Stock, Series A [incorporated by refer-
ence to Exhibit 4.1 to TCF Financial Corporation’s Current Report on Form 8-K filed November 14, 2008]
Warrant Agreement dated December 15, 2009 by and among TCF Financial Corporation, Computershare,
Inc. and Computershare Trust Company, N.A. [incorporated by reference to Exhibit 4.1 to TCF Financial
Corporation’s Form 8-A filed December 16, 2009]
Specimen Warrant to Purchase Shares of Common Stock of TCF Financial Corporation [incorporated by
reference to Exhibit 4.2 to TCF Financial Corporation’s Form 8-A filed December 16, 2009]
Letter Agreement dated as of November 14, 2008, between TCF Financial Corporation and the United States
Department of the Treasury [incorporated by reference to Exhibit 10.1 to TCF Financial Corporation’s
Current Report on Form 8-K filed on November 14, 2008]
Indenture dated August 19, 2008 between TCF Financial Corporation and Wilmington Trust Company, as
Trustee [incorporated by reference to Exhibit 4.1 to TCF Financial Corporation’s Current Report on Form 8-K
filed August 19, 2008]
Supplemental Indenture dated August 19, 2008 between TCF Financial Corporation and Wilmington Trust
Company, as Trustee [incorporated by reference to Exhibit 4.2 to TCF Financial Corporation’s Current Report
on Form 8-K filed August 19, 2008]
Form of 10.75% Junior Subordinated Note, Series I [incorporated by reference to Exhibit 4.3 to TCF Financial
Corporation’s Current Report on Form 8-K filed August 19, 2008]
Certificate of Trust of TCF Capital I [incorporated by reference to Exhibit 4.2 to TCF Financial Corporation’s
Registration Statement on Form S-3, filed August 11, 2008]
Amended and Restated Trust Agreement of TCF Capital I dated August 19, 2008 by and among TCF Financial
Corporation, as Depositor, Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as
Delaware Trustee and the Administrative Trustees named therein and the Several Holders named therein
[incorporated by reference to Exhibit 4.4 to TCF Financial Corporation’s Current Report on Form 8-K filed
August 19, 2008]
Form of 10.75% Capital Security, Series I for TCF Capital I [incorporated by reference to Exhibit 4.5 to
TCF Financial Corporation’s Current Report on Form 8-K filed August 19, 2008]
2009 Form 10-K : 87
ex h ibi t
N o.
4(k)
4(l)
10(a)
10(b)
10(b)-1*
10(b)-2
10(b)-3
10(b)-4*
10(b)-5*
Description
Guarantee Agreement for TCF Capital I dated August 19, 2008 by and between TCF Financial Corporation and
Wilmington Trust Company, as Guarantee Trustee [incorporated by reference to Exhibit 4.6 to TCF Financial
Corporation’s Current Report on Form 8-K filed August 19, 2008]
Copies of instruments with respect to long-term debt will be furnished to the Securities and Exchange
Commission upon request.
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 refer-
ence 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]; 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]; 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]
Amended and Restated TCF Financial Incentive Stock Program (as amended and restated October 20, 2008)
[incorporated by reference to Exhibit 10(b) to TCF Financial Corporation’s Current Report on Form 8-K filed
May 5, 2009]
Form of TCF Financial Corporation Incentive Stock Program Performance-Based Restricted Stock Agreement
[incorporated by reference to Exhibit 10(b)-1 of TCF Financial Corporation’s Current Report on Form 8-K
filed April 29, 2005]
Form of TCF Financial Corporation Restricted Stock Agreement and Non-Solicitation/Confidentiality
Agreement [incorporated by reference to Exhibit 10(b)-2 to TCF Financial Corporation’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2005]
Summary of Stock Award Program for Consumer Lending and Business Banker Divisions [incorporated by
reference to Exhibit 10(b)-3 to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2005]
Form of Year 2006 Executive Stock Grant Award Agreement dated January 23, 2006 [incorporated by refer-
ence to Exhibit 10(b)-4 to TCF Financial Corporation’s Current Report on Form 8-K filed January 25, 2006]
TCF Financial Corporation Restricted Stock Agreement and Non-Solicitation/Confidentiality Agreement
dated January 22, 2007 (“Performance-Based Stock Award”) [incorporated by reference to Exhibit 10(b)-5
to TCF Financial Corporation’s Current Report on Form 8-K filed January 25, 2007]
88 : TCF Financial Corporation and Subsidiaries
ex h ibi t
No .
10(b)-6*
10(b)-7*
10(b)-8*
10(b)-9*
10(b)-10*
10(b)-11*
10(b)-12*
10(b)-13*
10(b)-14*
10(b)-15*
10(b)-16*
10(b)-17*
Description
TCF Financial Corporation Restricted Stock Agreement and Non-Solicitation/Confidentiality Agreement,
dated January 22, 2007 [incorporated by reference to Exhibit 10(b)-6 to TCF Financial Corporation’s Current
Report on Form 8-K filed January 25, 2007]
TCF Financial 1995 Incentive Stock Program Incentive Stock Option Agreement of Craig R. Dahl dated
May 11, 1999 [incorporated by reference to Exhibit 10(b)-7 to TCF Financial Corporation’s Quarterly Report
on Form 10-Q for the quarterly period ended March 30, 2007]
Nonqualified Stock Option Agreement of Craig R. Dahl dated May 11, 1999 [incorporated by reference
to Exhibit 10(b)-8 to TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 2007]
Form of the 2008 Restricted Stock Agreement as executed by certain executives effective January 21, 2008
[incorporated by reference to Exhibit 10(b)-9 to TCF Financial Corporation’s Current Report on Form 8-K
filed January 25, 2008]
Form of the 2008 Nonqualified Stock Option Agreement as executed by certain executives effective
January 21, 2008 [incorporated by reference to Exhibit 10(b)-10 to TCF Financial Corporation’s Current
Report on Form 8-K filed January 25, 2008]
Nonqualified Stock Option Agreement as executed by Mr. Cooper, effective July 31, 2008 [incorporated by
reference to Exhibit 10(b)-11 to TCF Financial Corporation’s Current Report on Form 8-K filed August 6,
2008]
Amended and Restated Restricted Stock Agreement as executed by Mr. Cooper, effective January 20, 2009
[incorporated by reference to Exhibit 10(b)-13 to TCF Financial Corporation’s Current Report on Form 8-K
filed January 23, 2009]
Form of Amended and Restated Restricted Stock Agreement as executed by certain executives, effective
January 20, 2009 [incorporated by reference to Exhibit 10(b)-14 to TCF Financial Corporation’s Current
Report on Form 8-K filed January 23, 2009]
Form of Year 2009 Executive Stock Award as executed by certain executives, effective January 20, 2009
[incorporated by reference to Exhibit 10(b)-15 to TCF Financial Corporation’s Current Report on Form 8-K
filed January 23, 2009]
Form of Letter Agreement entered effective December 14, 2009 [incorporated by reference to Exhibit
10(b)-15 to TCF Financial Corporation’s Current Report on Form 8-K filed December 18, 2009]
Form of Agreement Termination Award Agreement effective December 14, 2009 [incorporated by reference
to Exhibit 10(b)-16 to TCF Financial Corporation’s Current Report on Form 8-K filed December 18, 2009]
Form of 2010 Restricted Stock Award Agreement effective December 14, 2009 [incorporated by reference
to Exhibit 10(b)-17 to TCF Financial Corporation’s Current Report on Form 8-K filed December 18, 2009]
2009 Form 10-K : 89
ex h ibi t
N o.
10(c)
10(d)
10(e)*
10(e)-1*
10(e)-2*
10(e)-3*
10(e)-4*
10(e)-5*
10(g)*
10(g)-1*
Description
TCF Financial Corporation Executive Deferred Compensation Plan as amended and restated through
January 24, 2005 [incorporated by reference to Exhibit 10(c) to TCF Financial Corporation’s Current
Report on Form 8-K filed January 27, 2005]
Restated Trust Agreement as executed with First National Bank in Sioux Falls as trustee effective as of
October 1, 2000 [incorporated by reference to Exhibit 10(d) of TCF Financial Corporation’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2000]; as amended by amendment adopted April 30,
2001 [incorporated by reference to Exhibit 10(d) of TCF Financial Corporation’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2001]; and as amended by amendments adopted May 3, 2002
[incorporated by reference to Exhibit 10(d) of TCF Financial Corporation’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002]; and as amended by Third Amendment of Trust Agreement for TCF
Executive Deferred Compensation Plan effective as of June 30, 2003 [incorporated by reference to Exhibit
10(d) of TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003]
Restricted Stock Agreement between William A. Cooper and TCF Financial Corporation dated January 24,
2005 [incorporated by reference to Exhibit 10(e)-2 to TCF Financial Corporation’s Current Report on
Form 8-K filed January 27, 2005]
Employment Agreement between Lynn A. Nagorske and TCF Financial Corporation effective January 1, 2008
[incorporated by reference to Exhibit 10(e)-6 to TCF Financial Corporation’s Current Report on Form 8-K
filed October 19, 2007], as supplemented by the letter agreement dated August 6, 2008 by and between
Mr. Nagorske and TCF Financial Corporation [incorporated by reference to Exhibit 99.1 to TCF Financial
Corporation’s Current Report on Form 8-K filed August 8, 2008]
Employment Agreement between Neil W. Brown and TCF Financial Corporation effective January 1, 2008
[incorporated by reference to Exhibit 10(e)-7 to TCF Financial Corporation’s Current Report on Form 8-K
filed October 19, 2007]
Form of Employment Agreement as executed by certain executives effective January 1, 2008 [incorporated by
reference to Exhibit 10(e)-8 to TCF Financial Corporation’s Current Report on Form 8-K filed October 19, 2007]
Employment Agreement between Craig R. Dahl and TCF Financial Corporation effective January 1, 2008
[incorporated by reference to Exhibit 10(e)-9 to TCF Financial Corporation’s Current Report on Form 8-K
filed October 19, 2007]
Amended and Restated Agreement between Mr. William A. Cooper and TCF Financial Corporation effective
as of July 31, 2009 [incorporated by reference to Exhibit 10(e)-6 to TCF Financial Corporation’s Current
Report on Form 8-K filed August 4, 2009]
Change in Control Agreement between Neil W. Brown and TCF Financial Corporation effective January 1, 2008
[incorporated by reference to Exhibit 10(g)-5 to TCF Financial Corporation’s Current Report on Form 8-K
filed October 19, 2007]
Form of Change of Control Agreement as executed by certain executives effective January 1, 2008
[incorporated by reference to Exhibit 10(g)-6 to TCF Financial Corporation’s Current Report on Form 8-K
filed October 19, 2007]
90 : TCF Financial Corporation and Subsidiaries
ex h ibi t
No .
10(g)-2*
10(j)-1
10(j)-2
10(k)
10(l)
10(m)
10(n)
10(n)-1
10(o)
10(p)
10(r)
10(r)-1
Description
Form of Change in Control and Non-Solicitation Agreement as executed by certain Senior Officers effective
January 1, 2008 [incorporated by reference to Exhibit 10(g)-7 to TCF Financial Corporation’s Current
Report on Form 8-K filed October 19, 2007]
TCF Financial Corporation Supplemental Employee Retirement Plan — Employees Stock Purchase Plan
(“ESPP”) as amended and restated through January 24, 2005 [incorporated by reference to Exhibit 10(j)
of TCF Financial Corporation’s Current Report on Form 8-K filed January 27, 2005]
TCF ESPP — Supplemental Plan (as amended and restated effective January 1, 2008) [incorporated by refer-
ence to Exhibit 10(j)-2 to TCF Financial Corporation’s Current Report on Form 8-K filed October 24, 2008]
Trust Agreement for TCF ESPP Supplemental Executive Retirement Plan (“SERP”) effective January 1, 2009
and dated November 20, 2008 [incorporated by reference to Exhibit 10(k) to TCF Financial Corporation’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2008]
TCF Financial Corporation Senior Officer Deferred Compensation Plan as amended and restated through
January 24, 2005 [incorporated by reference to Exhibit 10(l) to TCF Financial Corporation’s Current Report
on Form 8-K filed January 27, 2005]
Trust Agreement for TCF Financial Senior Officer Deferred Compensation Plan as executed with First National
Bank in Sioux Falls as trustee effective as of October 1, 2000 [incorporated by reference to Exhibit 10(m)
of TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000]; as
amended by amendment adopted April 30, 2001 [incorporated by reference to Exhibit 10(m) of TCF Financial
Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001]; and as amended by
Second Amendment of Trust Agreement for TCF Financial Senior Officers Deferred Compensation Plan
effective as of June 30, 2003 [incorporated by reference to Exhibit 10(m) of TCF Financial Corporation’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2003]
Directors Stock Grant Program [incorporated by reference to Exhibit 10(n) of TCF Financial Corporation’s
Current Report on Form 8-K filed April 29, 2005]
Resolution adopting Directors Stock Grant Program goal for fiscal year 2009 and after [incorporated by refer-
ence to Exhibit 10(n)-1 of TCF Financial Corporation’s Current Report on Form 8-K filed January 23, 2009]
Form of 2010 Management Incentive Plan effective January 1, 2010 [incorporated by reference to
Exhibit 10(o) of TCF Financial Corporation’s Current Report on Form 8-K filed December 18, 2009]
TCF Performance-Based Compensation Policy for Covered Executive Officers (as re-approved effective
January 1, 2009) [incorporated by reference to Exhibit 10(p) to TCF Financial Corporation’s Current Report
on Form 8-K filed May 5, 2009]
TCF Financial Corporation TCF Directors Deferred Compensation Plan as amended and restated through
January 24, 2005 [incorporated by reference to Exhibit 10(r) of TCF Financial Corporation’s Current Report
on Form 8-K filed January 27, 2005]
TCF Financial Corporation TCF Directors 2005 Deferred Compensation Plan, adopted effective as of January
6, 2005, as amended and restated through January 24, 2005 [incorporated by reference to Exhibit 10(r)-1
of TCF Financial Corporation’s Current Report on Form 8-K filed January 27, 2005]
2009 Form 10-K : 91
ex h ibi t
N o.
10(s)
10(t)
10(u)
10(u)-1
10(u)-2
10(u)-3
12(a)#
12(b)#
21#
23#
31#
32#
* Executive Contract
# Filed herein
Description
Trust Agreement for TCF Directors Deferred Compensation Plan [incorporated by reference to Exhibit 10(d)
to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000]; as
amended by amendment adopted April 30, 2001 [incorporated by reference to Exhibit 10(s) of TCF Financial
Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001]; as amended by amend-
ment adopted October 10, 2001 [incorporated by reference to Exhibit 10(s) of TCF Financial Corporation’s
Annual Report on Form 10-K for the year ended December 31, 2001]; and as amended by amendments
adopted May 3, 2002 [incorporated by reference to Exhibit 10(s) of TCF Financial Corporation’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2002]; and as amended by Third Amendment of TCF
Directors Deferred Compensation Trust effective as of June 30, 2003 [incorporated by reference to Exhibit
10(s) of TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003]
TCF Director Retirement Plan effective as of 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]
Supplemental Employee Retirement Plan for TCF Cash Balance Pension Plan, as amended and restated
through January 24, 2005 [incorporated by reference to Exhibit 10(u) of TCF Financial Corporation’s
Current Report on Form 8-K filed January 27, 2005]
TCF Financial Corporation 2005 Cash Balance Pension Plan SERP, adopted effective January 1, 2005
[incorporated by reference to Exhibit 10(u)-1 of TCF Financial Corporation’s Current Report on Form 8-K
filed January 27, 2005]; as amended effective April 1, 2006 [incorporated by reference to Exhibit 10(u)-1
of TCF Financial Corporation’s Current Report on Form 8-K filed February 9, 2006]
Amendment dated October 20, 2008 to the Supplemental Employee Retirement Plan for TCF Cash Balance
Pension Plan (as amended and restated through January 24, 2005). [incorporated by reference to
Exhibit 10(u)-2 to TCF Financial Corporation’s Current Report on Form 8-K filed October 24, 2008]
Amendment dated October 20, 2008 to the TCF Financial Corporation Cash Balance Pension Plan SERP
[incorporated by reference to Exhibit 10(u)-3 to TCF Financial Corporation’s Current Report on Form 8-K
filed October 24, 2008]
Computation of Ratios of Earnings to Fixed Charges for periods ended December 31, 2009, 2008, 2007,
2006 and 2005
Computation of Ratios of Earnings to Fixed Charges and Preferred Stock Dividends for periods ended
December 31, 2009, 2008, 2007, 2006 and 2005
Subsidiaries of TCF Financial Corporation (as of December 31, 2009)
Consent of KPMG LLP dated February 16, 2010
Rule 13a-14(a)/15d-14(a) Certifications (Section 302 Certifications)
Statement Furnished Pursuant to Title 18 United States Code Section 1350 (Section 906 Certifications)
92 : TCF Financial Corporation and Subsidiaries
Board of Directors
Senior Officers
William A. Cooper 5
Chairman of the Board and Chief Executive Officer
Peter Bell 2,3,4
Chair, Metropolitan Council
William F. Bieber 2,3,4
Chairman and Owner, ATEK Companies, Inc.
Theodore J. Bigos 2,3,4
Owner, Bigos Management, Inc.
Thomas A. Cusick 4
Retired Vice Chairman
Luella G. Goldberg 1,2,3,4,5
Past Chair, University of Minnesota Foundation,
Former Acting President, Wellesley College
George G. Johnson 1,4
CPA/Managing Director, George Johnson & Company
Vance K. Opperman 1,2,3,4
President and Chief Executive Officer,
Key Investment, Inc.
Gregory J. Pulles
Vice Chairman and Secretary
Gerald A. Schwalbach 1,2,3,4
Chairman, Spensa Development Group, LLC
Douglas A. Scovanner 1,4
Executive Vice President and Chief Financial Officer,
Target Corporation
Ralph Strangis 2,3,4,5
Senior Partner, Kaplan, Strangis and Kaplan, P.A.
Barry N. Winslow 4
Vice Chairman
1 Audit Committee
2 Compensation/Nominating/
Corporate Governance Committee
3 Advisory Committee —
TCF Employees Stock Purchase Plan
4 Shareholder Relations/
Capital and Expansion Committee
5 Executive Committee
TCF Financial Corporation
TCF Retail Lending
Chairman of the Board
and Chief Executive Officer
William A. Cooper
President and
Chief Operating Officer
Neil W. Brown
Executive Vice President
and Chief Financial Officer
Thomas F. Jasper
Vice Chairman and Secretary
Gregory J. Pulles
Vice Chairman
Barry N. Winslow
Executive Vice President
and Chief Information Officer
Earl D. Stratton
Executive Vice President
Craig R. Dahl
Senior Vice Presidents
James S. Broucek
Steven D. Christensen
Joseph T. Green
Jason E. Korstange
Barbara E. Shaw
David M. Stautz
TCF Retail Bank
President and
Chief Operating Officer,
TCF Financial Corporation
Neil W. Brown
TCF Branch Banking
Managing Director
Mark L. Jeter
Executive Vice Presidents
Robert C. Borgstrom
Luis J. Campos
Timothy G. Doyle
Timothy B. Meyer
Senior Vice Presidents
Delia M. Conrad
Peter R. Daugherty
James T. Dowiak
Mark W. Gault
Michael J. Olson
Managing Director
Mark W. Rohde
Executive Vice Presidents
Timothy J. Bosiacki
Joseph W. Doyle
Claire M. Graupmann
James L. Koon
Paul R. Tokarczyk
Matthew R. Wiley
Senior Vice Presidents
Robert J. Brueggeman
Rose M. Dickey
Michael A. Dill
Donald J. Hawkins
Daniel B. Hoffman
Vicki L. Makowka
Carol B. Schirmers
Raymond J. Swidron
Thomas K. Torossian
TCF wholesale Bank
Vice Chairman,
TCF Financial Corporation
Barry N. Winslow
Executive Vice President,
TCF Financial Corporation
Craig R. Dahl
TCF Commercial Banking
Managing Director
James J. Urbanek
Executive Vice Presidents
Douglas W. Benner
Robert A. Henry
Michael R. Klemz
David J. Veurink
Senior Vice Presidents
Wesley M. Anderson
John E. Boyle
Michael Y. Chin
Jeffrey T. Doering
Scott A. Fedie
Russell P. McMinn
Luke K. Oosterhouse
Douglas A. Ortyn
William R. Patterson
Guy J. Rau
Janelle J. Rietz-Kamenar
Michael Roidt
Elisabeth A. Rojas
Steven E. Rykkeli
Patrick P. Skiles
2009 Annual Report : 93
TCF Specialty Finance
TCF Corporate Functions
TCF Human Resources
TCF Finance / Treasury
Executive Vice President
and Chief Financial Officer,
TCF Financial Corporation
Thomas F. Jasper
Executive Vice Presidents
James S. Broucek
David M. Stautz
Senior Vice Presidents
James M. Dunne
Brian P. Engels
Jason R. Voronyak
Michelle O. Wright
TCF Support Services
Executive Vice President
and Chief Financial Officer,
TCF Financial Corporation
Thomas F. Jasper
Executive Vice President
and Chief Information Officer,
TCF Financial Corporation
Earl D. Stratton
Executive Vice Presidents
Gregg R. Goudy
James C. LaPlante
Senior Vice Presidents
Michael J. Beier
Ronald L. Britz
Beverly L. Burman
Beverly M. Craig
Carol Jean F. Felth
Christopher N. Germann
James M. Matheis
David B. McCullough
Anton J. Negrini
Richard J. Nelson
Leonard D. Steele
Cathleen L. Wilkins
Executive Vice President,
TCF Financial Corporation
Craig R. Dahl
Executive Vice President —
Finance
Michael S. Jones
Executive Vice President —
Credit
Mark D. Nyquist
TCF equipment Finance, Inc.
Executive Vice Presidents
Bradley C. Gunstad
William S. Henak
Senior Vice Presidents
Gloria J. Charley
Richard J. Chenitz
Peter C. Darin
Walter E. Dzielsky
Michael A. Kloos
Jodie L. Palmer
Gary A. Peterson
Charles A. Sell, Jr.
Robert J. Stark
Mark H. Valentine
Frederick M. Van Etten
winthrop Resources Corporation
Executive Vice Presidents
Paul L. Gendler
Richard J. Pieper
Senior Vice Presidents
Gary W. Anderson
Dean J. Stinchfield
TCF Inventory Finance, Inc.
President and
Chief Executive Officer
Rosario A. Perrelli
Executive Vice Presidents
Howard J. Hentz
Vincent E. Hillery
Christopher Meals
Senior Vice Presidents
Peter J. Baranowski
Larry M. Tagli
Mark J. Wrend
Dornett Wright
TCF Commercial Finance
Canada, Inc.
President
Peter D. Kelley
President and
Chief Operating Officer,
TCF Financial Corporation
Neil W. Brown
Executive Vice President
and Corporate Human
Resources Director
Barbara E. Shaw
Senior Vice Presidents
Edward J. Gallagher
Viane R. Hoefs
Roger T. Sorensen
TCF Legal
Vice Chairman and Secretary,
TCF Financial Corporation
Gregory J. Pulles
Senior Vice President
and General Counsel,
TCF Financial Corporation
Joseph T. Green
Executive Vice President
Brian J. Hurd
Senior Vice Presidents
Linda J. Firth
Shelley A. Fitzmaurice
Douglass B. Hiatt
Charles P. Hoffman, Jr.
Gloria J. Karsky
Beth A. Paulson
R. Elizabeth Topoluk
TCF Credit Quality
Vice Chairman,
TCF National Bank
and Chief Credit Officer
Timothy P. Bailey
Executive Vice President
Paul B. Brawner
Senior Vice Presidents
Barbara L. Buss
Scott D. Campbell
Andrew D. Clark
Larry M. Czekaj
Gregory W. Drehmel
Martin J. Krogman
Dennis McClelland
Kathleen M. Wacker
94 : TCF Financial Corporation and Subsidiaries
Offices
executive Offices
TCF Financial Corporation
200 Lake Street East
Mail Code EX0-03-A
Wayzata, MN 55391-1693
(952) 745-2760
TCF National Bank
Headquarters
2508 South Louise Avenue
Sioux Falls, SD 57106
Minnesota/South Dakota
TCF equipment Finance, Inc.
Headquarters
11100 Wayzata Boulevard
Suite 801
Minnetonka, MN 55305
(952) 656-5080
winthrop Resources Corporation
Headquarters
11100 Wayzata Boulevard
Suite 800
Minnetonka, MN 55305
(952) 936-0226
TCF Inventory Finance, Inc.
Headquarters
2300 Barrington Road
Suite 600
Hoffman Estates, IL 60169
(877) 872-8234
TCF Commercial Finance Canada, Inc.
Headquarters
700 Dorval Drive
Suite 102
Oakville, Ontario L6K 3V3
Canada
(905) 844-4430
Traditional Branches
Minneapolis/St. Paul Area (45)
Greater Minnesota (2)
South Dakota (1)
Supermarket Branches
Minneapolis/St. Paul Area (55)
Greater Minnesota (4)
Campus Branches
Minneapolis/St. Paul Area (2)
Greater Minnesota (2)
Illinois/wisconsin/Indiana
Traditional Branches
Chicagoland (41)
Milwaukee Area (10)
Kenosha /Racine Area (6)
Supermarket Branches
Chicagoland (155)
Milwaukee Area (8)
Kenosha /Racine Area (2)
Indiana (5)
Campus Branches
Chicagoland (4)
Greater Illinois (2)
Michigan
Traditional Branches
Metro Detroit Area (51)
Supermarket Branches
Metro Detroit Area (1)
Greater Michigan (1)
Campus Branches
Metro Detroit Area (2)
Greater Michigan (1)
Colorado/arizona
Traditional Branches
Metro Denver Area (26)
Colorado Springs (8)
Metro Phoenix Area (7)
Supermarket Branches
Metro Denver Area (2)
Stockholder Information
Stock Data
Year
2009
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2008
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2007
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2006
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2005
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Close
High
Dividends
Paid
Low Per Share
$13.62
13.04
13.37
11.76
$13.66
18.00
12.03
17.92
$17.93
26.18
27.80
26.36
$27.42
26.29
26.45
25.75
$27.14
26.75
25.88
27.15
$14.72
15.83
16.67
14.31
$20.00
28.00
19.31
22.04
$27.95
28.25
28.99
27.91
$27.89
28.10
27.70
28.41
$28.78
28.82
28.56
32.03
$11.36
12.71
11.37
8.74
$11.22
9.25
11.91
14.65
$17.17
22.69
25.39
24.93
$25.16
24.94
24.91
24.23
$25.02
25.81
24.55
26.42
$
$
.05
.05
.05
.25
.25
.25
.25
.25
$.2425
.2425
.2425
.2425
$
.23
.23
.23
.23
$.2125
.2125
.2125
.2125
For more historical information on TCF’s stock price and
dividend, visit ir.tcfbank.com.
Trading of Common Stock
The common stock of TCF Financial Corporation is listed
on the New York Stock Exchange under the symbol TCB.
At December 31, 2009, TCF had approximately 129.2 million
shares of common stock outstanding.
2010 Common Stock Dividend Dates
Expected Record:
January 29
April 30
July 30
October 29
Expected Payment:
February 26
May 28
August 31
November 30
annual Meeting
The annual meeting of stockholders of TCF will be held
on Wednesday, April 28, 2010, 3:00 p.m. (local time) at
the Marriott Minneapolis West, 9960 Wayzata Boulevard,
St. Louis Park, Minnesota.
2009 Annual Report : 95
Transfer agent and Registrar
Computershare Trust Company, N.A.
PO Box 43078
Providence, RI 02940-3078
(800) 443-6852
www.computershare.com
Direct Stock Purchase and Dividend Reinvestment Plan
Computershare Trust Company, N.A. offers the Computershare
Investment Plan, a direct stock purchase and dividend
reinvestment plan for TCF Financial Corporation common
stock. This shareholder-paid program provides a low-cost
alternative to traditional retail brokerage methods of
purchasing, holding and selling TCF common stock. The
Plan is sponsored and administered by our Transfer Agent,
Computershare, Inc. Information is available from:
Computershare Investment Plan for TCF Financial Corporation
c/o Computershare
PO Box 43078
Providence, RI 02940-3078
(800) 443-6852
www.computershare.com
Note to Stockholders
It is important for registered stockholders to keep the
transfer agent informed of their current address and to
cash their dividend payments; otherwise, TCF may be
required by state law to report and deliver (or “escheat”)
these shares and any unclaimed dividends as unclaimed
property, even if TCF does not have physical possession
of the stock certificate. In other words, TCF is required to
escheat shares and un-cashed dividends if there has been
no stockholder-initiated activity or no stockholder contact
with the transfer agent within the state’s dormancy period.
Unclaimed property rules vary by state. Some states do
not consider the act of reinvesting dividends in a dividend
reinvestment plan as account activity that would signify a
stockholder’s continued interest in the underlying shares of
stock. Your failure to keep an active account can result in
the escheatment of your shares and any un-cashed dividends
to the state, in which case you will need to request a refund
of the unclaimed property from the state.
Stockholders holding shares in street name should contact
their broker regarding questions about escheatment and
unclaimed property laws.
TCF is not providing legal advice on unclaimed property laws.
96 : TCF Financial Corporation and Subsidiaries
Investor/analyst Contact
Jason Korstange
Senior Vice President
Corporate Communications
(952) 745-2755
Stacey Ronshaugen
Assistant Vice President
Investor Relations
(952) 745-2762
Credit Ratings
available Information
Please visit our website at ir.tcfbank.com for free access to
Company news releases, investor presentations, conference
calls to discuss published financial results, TCF’s Annual
Report and periodic filings required by the Securities and
Exchange Commission, including annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports. Information
may also be obtained, free of charge, from:
TCF Financial Corporation
Corporate Communications
200 Lake Street East
EX0-01-C
Wayzata, MN 55391-1693
(952) 745-2760
Standard & Poor’s
Outlook
TCF Financial Corporation:
Long-term counterparty
Short-term counterparty
Trust Preferred
TCF National Bank:
Long-term counterparty
Short-term counterparty
Last Review
December 2009
Negative
Fitch Ratings
Outlook
TCF Financial Corporation:
Last Review
September 2009
Negative
BBB
A-2
BB
BBB+
A-2
Long-term IDR
Short-term IDR
Trust Preferred
TCF National Bank:
Long-term IDR
Short-term IDR
A-
F1
BBB
A-
F1
Moody’s
TCF National Bank:
Last Review
March 2009
Outlook
Issuer
Long-term deposits
Short-term deposits
Bank financial strength
Negative
A1
A1
Prime-1
B-
Stock Price Performance (In Dollars)
$35
30
25
20
15
10
5
Year
Ending
Stock Price*
Dividends*
4
0
/
3
/
9
t
i
l
p
S
k
c
o
t
S
5
9
/
0
3
/
1
1
t
i
l
p
S
k
c
o
t
S
7
9
/
8
2
/
1
1
t
i
l
p
S
k
c
o
t
S
$1.50
1.25
1.00
0.75
0.50
0.25
0.00
6-86
12-86
12-87
12-88 12-89 12-90 12-91 12-92 12-93 12-94 12-95 12-96 12-97 12-98 12-99 12-00 12-01 12-02 12-03 12-04 12-05 12-06 12-07 12-08 12-09
*Stock split adjusted
For more historical information on TCF’s stock price and dividend, visit ir.tcfbank.com.
TCF was built on a conservative philosophy of banking, which has been the
foundation of our growth and success. We understand what our customers
want and, as a result, we deliver the best products with the most convenient
services in the markets we serve. Our talented team members have been
putting The Customer First for over three generations and now, more than
ever, we are focused on growing our core businesses, providing exceptional
customer service, and staying true to our corporate philosophy (see back
cover). We greatly appreciate the trust our customers put in us, the effort
and innovation of our team members and the exceptional leadership from
our Board of Directors. We are optimistic about the future at TCF.
Table of Contents
1 Letter to Our Stockholders
11 Board of Directors
12 Financial Highlights
Annual Report on Form 10-K
1 Business
16 Selected Financial Data
17 Management’s Discussion and Analysis
46 Consolidated Financial Statements
50 Notes to Consolidated Financial Statements
79 Other Financial Data
92 Corporate Information
95 Stockholder Information
97 Corporate Philosophy
Corporate Philosophy
Profit Centers. TCF’s focused profit center structure creates
superior financial performance. Day-to-day operations are
organized by profit centers within business lines: Wholesale
Banking (commercial banking, leasing and equipment
finance, and inventory finance), Retail Banking (branch
banking and retail lending), Treasury Services and Support
Services, each with profit center goals and objectives. TCF
emphasizes net income, return on average assets and
earnings per share growth at acceptable levels of risk. We
offer products that are profitable and contribute to these
goals. Our profit center structure creates a highly respon-
sive and performance driven culture.
Convenience. TCF emphasizes convenience in banking; we’re
open 12 hours a day, seven days a week, 364 days per year.
TCF banks a large and diverse customer base. We provide
customers innovative products through multiple banking
channels, including traditional, supermarket and campus
branches, TCF Express Teller® and other ATMs, debit cards,
phone banking, and Internet banking.
Checking Accounts. TCF focuses on growing and retaining
its large number of low-interest cost checking accounts
by offering convenient hours and delivery channels, and
products with many free features. TCF uses the checking
account as the anchor account to build additional
customer relationships.
Deposits. TCF earns a significant portion of its profits
from the deposit side of the bank. We accumulate a large
number of low cost accounts through convenient services
and products targeted to a broad range of customers.
As a result of the profits we earn from the deposit business,
we can minimize credit risk on the asset side.
Secured Lender. TCF is primarily a secured lender and
emphasizes credit quality over asset growth. The costs of poor
credit far outweigh the benefits of unwise asset growth.
Conservative Underwriting. TCF’s diversified asset portfolio
and our extensive credit review practices reduce our credit
risks while creating profitability and sustainable growth,
even in the most challenging economic environments.
We lend and lease to high-quality customers and invest
only in programs that add value to the organization and
yield solid returns.
Interest-rate Risk. TCF believes interest-rate risk should
be minimized. Interest-rate speculation does not generate
consistent profits and is high risk.
2009 Annual Report : 97
Capital and Liquidity. TCF focuses on prudent capital and
liquidity management which strengthens our capital
position, increases our borrowing capacity, and reduces our
costs and risks. We are solidly capitalized and have access
to ample liquidity to conduct business. TCF’s financial
strength makes us a safe and sound financial institution.
Expansion. TCF grows both through de novo expansion and
acquisition. We are growing by starting new businesses,
opening new branches and offering new products and services.
The Customer First. TCF strives to place The Customer First.
We believe providing great service helps to retain existing
customers, attract new customers, create value for our
stockholders, and build pride in our employees. We also
respect customers’ concerns about privacy and know they
place their trust in us. TCF is committed to protecting the
private information of our customers and retaining that
trust is our priority.
Stock Ownership. TCF encourages stock ownership by our
officers, directors and employees. We have a mutuality of
interest with our stockholders, and our goal is to earn for
them an above-average return.
Technology. TCF places a high priority on the development of
technology to enhance productivity, customer service and
new products. Properly applied technology increases revenue,
reduces costs and enhances customer service. We centralize
back office activities and decentralize the banking process.
Conservative Accounting. TCF utilizes conservative account-
ing and financial reporting principles that accurately and
honestly report our financial condition and results of
operations. We believe good accounting drives good business
decision-making.
Open Employee Communication. TCF encourages open
employee communication and promotes from within whenever
possible. TCF places the highest priority on honesty, integrity
and ethical behavior.
Equal Treatment. TCF does not discriminate against anyone
in employment or the extension of credit. As a result of
TCF’s community banking philosophy, we market our products
and services to everyone in the communities we serve.
Community Participation. TCF believes in community
participation, both financially and through volunteerism.
We feel a responsibility to help those less fortunate.
TCF Financial Corporation 2009 Annual Report
Built on convenience, stability and trust.
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TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
www.tcfbank.com